,.    •  r   '•■^•^    ^ 


UNIVERSITY  OF  CALIFORNIA 
AT  LOS  ANGELES 


L^ 


■'t  ^/<£  iit. 


THE 


ELEMENTS 


POLITICAL   ECONOMY. 


BY 


FRANCIS    WAYLAND,  D.  D., 

LATE   PRESIDENT  OF   BROWN   UNIVERSITY,   AND   PROFESSOR   OF 
MORAL   PHILOSOPHY. 


FORTIETH     THOUSAND. 


BOSTON: 

GOULD      AND      LINCOLN, 

59     WASHINGTON     STREET. 

NEW  YORK:  SHELDON  AND  COMPANY. 

CINCINNATI :   GEO.  S.  BL^VNCUARD. 

1  8  G  0  . 


i  J.KX  i>  ■{ 


14b;)  i;^ 


Entered,  according  to  Act  of  Congress,  in  the  year  1837,  by 

FRANCIS    WAYLAND, 

In  the  Clerk's  Office  of  t)ie  District  Court  for  the  District  of  Rhode  Island. 


PREFACE. 


The  following  work  contains,  in  substance,  the 
I>;ctiires  on  Political  Economy  which  have  been 
delivered,  for  some  years  past,  to  the  Senior  CIeiss  in 
Brown  University. 

When  the  Aiitlior's  attention  was  first  directed  to 

the   Science  of  Political   Economy,   he   was  struck 

with  the  simplicity  of  its  principles,  the  extent  of  its 

generalizations,   and   the    readiness  with  which    its 

facts  seemed  capable  of  being  brought  into  natural 

and  methodical  arrangement.     At  the  same  time,  it 

appeared  to  him   that   the  works  on  this  subject,  in 

general  use,  while  they  presented  its  doctrines  truly, 

yet  did  not  present  them  in  siich  order  as  would  be 

most  likely  to  render  them  serviceable  either  to  the 

general  student,  or  to  the  practical  merchant.     This 

defect,  for  the   sake  of  his  pupils,  he  endeavored  to 

C  supply.     What  he  thus  at  first  prepared,  for  Jh em, .he 

^  now  offers  to   the  public.     In    how  far  he  has  suo* 

C  cecded,  it  must  be  left  for  others  to  decide. 

^       His  object  has  been  to  write  a  book^  which  any 

"V  51^  ^^^  chooses  may  understand.     He  has,  thcre- 

.r  feE§i  labored  to  express  tlie  general  jpi;iucij^)les  in  the 

plainest  manner  possiblej^nd  to  illustrate  them  by 

cases  with  which  e^ery  person  |s  familiar.     In  doing 


IV  PREFACE. 

this,  he  is  aware  that  he  may  at  times  have  become 
chargeable  with  re})etition.  Sometimes,  the  same 
case  may  have  been  introduced  a  second  time,  for 
the  sake  of  iUustrating  a  dilfereut  principle.  At  oth- 
er times,  the  same  fact  maj'  b'^long  equally  to  two 
different  divisions  of  the  subject.  In  this  latter  case, 
he  has  introduced  it  the  second  time  instead  of  refer- 
ring the  reader  to  what  has  been  said  before,  lecauso 
he  believes  that  readers  rarely  take  the  trouble  to 
make  use  of  a  marginal  reference.    » 

The  priiiciples  af  EaliUeaLJScaiimny_arejo  cjosdy 
analogous  to  those  of  Moral  Philosophy,  tljaL almost 
every  question  in  the  one,  may  be  argued  on  grounds 
belonging  to  the  other.  He  has  not,  however, 
thought  it  proper,  in  general,  to  intermingle  them, 
but  has  argued  economical  questions  on  merely  eco- 
nominal  grounds.  For  this  reason,  he  has  omitted 
many  considerations  which  are  frequently  introduced 
into  discussions  on  this  subject.  For  instance,  on 
tlie  question  of  protecting  duties,  it  is  frequently 
urged,  that,  if  a  contract  have  been  made  by  the 
f^overnment  with  the  manufacturer,  that  contract  is 
morally  binding.  This,  it  will  be  perceived,  is  a 
question  of  Ethics,  and  is  simply  the  question, 
whether  men  are  or  are  not  morally  bound  to  fulfil 
tlieir  contracts.  With  this  question,  Political  Econ- 
omy has  nothing  to  do.  Its  only  business  is,  to  de- 
cide whether  a  given  contract  were  or  were  not  wise. 
This  is  the  only  question,  therefore,  treated  of  in  the 
discussion  of  this  subject  in  the  following  work. 

It  may  possibly  be  urged  that  the  Author,  having 
had  no  experience  in  mercantile  business,  should 
have  left  this  subject  to  be  treated  of,  by  practical 


PRLFACE 


men.  To  this  he  has  only  to  rtply,  that  principles 
belong  to  all  men  ;  that  there  seemed  very  little 
hope  that  this  subject  would  be  undertaken  by  men 
engaged  in  active  business  ;  and  that  he  could  not 
perceive  \vhy»his  doing,  as  well  as  he  was  able,  a 
work  which  seemed  to  be  necessary,  should  prevent 
any  one  else  from  doing  it  as  much  better  as  ho 
saw  fit. 

It  has  been  to  the  Author  a  source  of  regret,  that 
the  course  of  discussion  in  the  following  pages,  has 
unavoidably  led  him  over  ground  which  has  fre- 
quently been  the  areiia  of  political  cpntroversyj  In 
all  such  cases,  he  has  endeavored  to  state  what 
seemed  to  him  to  be  the  truth,  without  fear,  favor, 
or  aftection.  He  is  conscious  to  himself  of  no  bias 
towards  any  party  whatever,  and  he  thinks  that  he 
who  will  read  the  whole  work,  will  be  convinced 
that  he  has  been  influenced  by  none.  While  he 
cherishes  for  his  fellow  citizens,  who  are  engaged  in 
political  warfare,  every  feeling  of  personal  respect, 
he  desires  it  to  be  believed  that  he  entertains  for 
party  itself,  whether  political,  ecclesiastical,  or  social, 
the  opinion  which  "  befits  him  as  an  American,  a 
Christian,  and  a  gentleman."  * 

It  having  become  necessary  to  print  a  third  edition 
of  the  Elements  of  Political  Economy,  the  Author 
has  revised  the  work  with  all  the  attention  of  which 
he  was  capable.  He  hopes  that  it  will  be  found  that 
he  has  improved  it,  by  omitting  in  a  few  cases  what 
was  superfluous,  by  rendering  more  intelligible  what 


•  Col.  Hutchinson,  when  speaking  in  the   i3ritish  Parliament,  re- 
•pecting  the  part  which  he  had  taken  in  the  King's  death. 


n  PREFACE. 

was  obscure,  and  by  adding  in  several  ]ilaces  such 
suggestions  as  have  arisen  from  an  observation  of  the 
commercial  condition  of  our  country  within  the  last 
two  or  three  years.  The  Author  also  hopes  that  the 
present  edition  will  appear  in  a  betterdress  aid  at  a 
lower  price  than  those  which  have  preceded  it ;  ami 
thus  be  more  deserving  of  the  attention  of  those  iri- 
Btructors  who  have  used  it  as  a  text-book. 

Brown  University,  May  1,  1840. 


PREFACE   TO  THE   FOURTH   EDITION. 

The  demand  for  the  Elements  of  Political  Econo- 
my having  been  such  as  to  induce  the  publishers  to 
stereotype  it,  the  Author  has  given  to  it  a  careful 
revival.  A  few  paragraphs  have  been  omitted,  a  few 
have  been  added,  and  some  of  its  doctrines  have 
been  slightly  modified.  No  material  alteration  has 
however  been  made.  Grateful  for  the  kindness  with 
which  it  has  been  received,  and  in  the  hope  that  it 
may  conduce,  in  some  small  degree,  to  facilitate  the 
study  of  the  science  of  which  it  treats,  it  is  agiin 
submitted  to  the  judgment  of  the  public. 

B R 0 WW  Uniyebsitt,  October  1,  1841. 


CONTENTS 

AND 

PLAN    OF    THE    WORK, 


INTRODUCTION. 

DEFINITIONS,  AND  DIVISION  OF  THE  SUBJECT. 

Pa-ie 

Puliti'jal  Economy,  Wealth,     ....  l& 

Value,  Intrinsic,                  .             .             .             .             .  .16 

"       Exchangeable,               .             .             .             .             •  ^^ 

Cost, 24 

Production,        .....••  24 

Exolninire,  .  ....•••       25 

Distribution,      .......  26 


v^onsuinption, 


26 


BOOK    FIRST. 

OF  PRODUCTION. 

CHAPTER   FIRST. 

OF  CAPITAL 
The  Nature  of  Capitnl,       ......       30 

The  Fnrins  of  Capital,               .             .                          .             .  30 

Tlie  Changes  which  Capital  undergoes,   .             .             .  .31 

The  Increase  of  Capital,             .....  33 

I'rofiuctive  ana  unproductive  Capital,       .             .             .  .35 

Fixed  and  circulating  Capital,              .             .             .             .  JG 

Money,       .......  41 

CHAPTER    SECOND. 

OF  INDUSTRY. 

PART   I. 

THE  OBJECTS  AND  FORMS  OF  HUMAN  INDUSTRY. 
,  SECTION  I. 

TnS   DIFFERENT   OBJECTS   OF   HtTMAN   InDOSTRT. 

(change  of  Elementary  form,  ....  43 

Change  of  Aggregate  form,      ....  44 

"  "  Place,    ......  44 

General  Cuitclusiuiis,   .....  46 


till 


CONTENTS. 


SECTION  il 

The  different  Forms  of  Human  Inddstrt 

Industry  of  Discovery,       .....  50 

"          "  Invention,                .....  50 

Operative  Indu.-'rv,             .             .             .             .  .52 

Ofliie  Products  or  these  various  forms  of  Human  IfiuUsstry  54 

Tiie  Product  of  the  Operative  Laborer,     .             .             .  .54 

"        "          Discoverer,            ...  &5 


PART   II. 

THE  MODES  BY  WHICH  THE  PRODUCTIVENESS  OF  HUMAN  /NDUSTRV 
MAY  BE  INCREASED. 


SECTION  I. 

The  use  of  Natural  Agents. 

Of  Natural  Agents, 

Of  Tools  and  Machines, 

Of  Natural  Agents  which  create  Momentum. 

Of  Animate  Agents,     .... 

Of  Inanimate  Agents,       •.  .  . 

Gunpowder,      .  .  .  . 

Wmd,  ..... 

Gravitating  power  of  Water,   .  . 

Steam,         ..... 

The  advantages  of  Inanimate  over  Animate  Agents, 

Of  the  Natural  Agents  by  which  Momentum  is  applied, 

Uses  of  these  Agents,   ..... 

SECTION  II. 
Of  Division  op  Labor. 
Fnnciples  on  which  the  utility  of  Division  of  Labor  depends, 


60 
60 
60 
6i2 
62 
64 
65 
66 
67 
68 
70 
72 


SECTION  III. 

Limitations  to  the  Division  of  Labor. 


From  the  Nature  of  the  Process, 

From  other  Causes, 

Capital, 

Demand, 

Of  National  Division  of  Labor, 


83 
83 
83 
85 
98 


SECTION  JV. 

Effects  op  the  increased  i'roductiveness  of  Human  Industry. 

I.     Effect  upon  Producers,            .            .            .            .             .  J.17 

Immediate,         .......  97 

Ultimate,    ........  99 

'I.     Effect  upon  C(  nsumers,              ....  103 


CONTENTS.  IX 


CHAPTER   THIRD. 

OF  TUB   LAWS  WHICH  GOVERN   THE  APPLICATION    OF  LABOR  TO 
CAPITAL. 

SECTION   I. 
Tas   Conditions  op  our  Being,  on   which   thb   Laws  on  this  Scojbct 

ARB   FOIJNDSD,  ......  llW 

SECTION  II. 
Tnoustri    will   be  applied   TO   Capital,  as   evurt  Man  bnjovb  thb 

ADVANTAGES   OP   UIS    LaBOR   AND   CAPITAL. 

As  every  man  may  gain  all  he  can,  .  .  109 

As  every  man  may  use  his  own  as  he  will,  .  .  .  109 

SECTION  III. 

Labor  will  be  applied  to  Capital,  as  everv  Mam  buffers  the   incon- 
veniences OF  Idleness,  .....        IJo 
Poor  Laws,      .....  .  120 

SECTION  IV. 

Thb  greater  the  Ratio   op  Capital  to  Labor,  the   greatbs  wtll   bb 

the  Stimulus  to  Labor,  ....       1*0 

SECTION  V. 
Imdustrt  will  be   applied  to  Capital,  in   proportion  to  thi   Intklleo- 


tual  Condition  op  a  People, 


1^ 


SECTION  VI. 


Of  the  Effects  of  direct  Legislation,  as  a  means  of  utcRBAsiNa 

Production. 

Production,      ....  •  •  133 

Of  Protecting  Duties,       ...  .  •       135 

Of  Bounties,    .  .....  140 

Objections  Considered,     ....»•       IJO 


BOOK    SECOND 

EXCHANGE. 

CHAPTER  FIRST. 

UARTER,  OR    EXCriAiNUE  IN   KIND. 

SECTION  I. 
Of  ns  Principles  -n  our  Constitution  which  oivb  risb  id  Exchanqh,    I<54 


S  CONTENTS. 

SECTION  II. 

General  Doctrines  of  Exchanob. 

Of  the  exclianfreable  value  of  Products,               .  .       165 

Exchange  confers  no  new  value,         .              .              .  1(59 

Conditions  on  wliich  frequency  of  Exchange  depends,  .       178 

Statrnation  of  Business,           ....  I7d 

Eirects  of  legislative  enactments  on  Exchange,               i  .       1^1 

Internal  Improvements,          ....  183 

CHAPTER   SEr-OND. 

EXCHANUE  BY  MEANS  OF  A  METALLIC  CURRENCY. 

SECTION  1. 
De  THE  Use  op  a  CiRcaLATiNo  Medium,         .  .  •  188 

SECTION  II. 

Up  the  QrALiTiES  necessary  to  that  which   constitutbs  a  Circulatino 

Medium,  .......       195 

SECTION  III. 

Of  the  Functions  op  Money,  .....       200 

SECTION  IV. 

Op  the  Agency  op  Government,  in  respect  to  a  Circulating  Medium,    216 

CHAPTER   THIRD. 

OF  A  CIRCULATION   BY  MEANS  OF  A  PAPER  CURRENCY. 

SECTION  I. 

Of  the  Nature  op  Banks  in  GENERii. 

Banks  of  Deposit  and  Exchange,  ....  224 

Banks  of  Discount,  or  Loan,  ....  2:?2 

LJiinks  of  Circulation,  or  Issue,    ....  ii',]5 

Of  the  Sources  of  the  Profit  of  Banks,  .  .  241 

SECTION  II. 

Oj'ths  Uti.mty  op  Banks. 

Aa  Institutions  of  Deposit,  ....  242 

"  ♦'    Loan,         .....  245 

♦'  "    Circulation,     ....  259 

SECTION  III. 

■^OVANTAOBS   AND    DISADVANTAGES   OP   A    PaPRH   (IiRCULATION,        •  •  261 

SECTION  IV. 
\yw  Th«  AoENOT  OP  Society,  that  ih,  of  Uovernment,   in  iIespriit  t«>  a 

FapUU   ClKOUI.ATIUN,        .....  277 


CONTENTS.  XI 

ROOK    THIRD. 

OF  DISTRIBUTION. 

CHAPTER  FIRST, 

WAGES,  OR  THE  PRICE  OF  LABOR. 

SECTION  I. 
The  General  Principles  op  WAOEa 

or  Simple  Labor,  .  .  .  .  .  yf)l 

Ol  Educated  Labor,    .  .  ...  291 

Oi  the  supply  of  Simple  Labor,   .....  2!t8 

Of  the  demand  for  Simple  Labor,       ....  2i)!) 

Population  and  Wages,    .  ...  3(tl 

Labor  in  the  Fine  Arts,  ...  .  309 

SECTION  n. 

Of  the  Special  Circitmstance.s  by  which,  irrespectively  op   Capital, 

TUB  WAOES   OF   LaBOR   ARE   AFFECTED,       .  •  .  .310 

CHAPTER   SECOND. 

THE  PRICE  OF  MONEY,  OR  INTEREST. 

SECTION  I. 

Op  the  benefit  of  Capital  to  the  Laborer,  .  *  .       315 

SECTION  II. 
Of  Risk  a.nd  Convenience  op  Investment. 

Of  Risk,  ...,.♦..      319 

Of  Convenience  of  Investment,         0  .  .  323 

SECTION  III. 
Of  the  Rate  of  Interest,  as  affected  iiy  Tim  nsB  op  Capital. 

Bj  the  average  profit  of  Capital,  ....  324 

"  Ratio  between  Supply  and  Demand,        .  .  .  325 

•'  Fiitticm  oi  Capital,    ......  328 

'    Taxation,   .......  329 

♦•   Usury  Laws,   .......  329 

Of  Stocks,      .......  334 

CHAPTER   THHtD. 

OF  THE  PRICE  OF  LAND,  OR  RENT. 

Price  of  Land,  or  Rent,    ......  3.19 

Mines,  .......  3r)2 

Interest  of  Real  Estate,    ......  3r>J 

Extent  of  Business  .....  3.'>7 

Insurance,  .  ...  359 


XII  CONTENTS, 

BOOK    FOURTH. 

OF  CONSUI\IPriOx\. 

CHAPTER   FIRST. 

OF  THE  NArUKE  AJMD  DESIGN  OF  COiNSUjMPITO.V. 

Nature  of  Consumption,  ....       36U 

Design  of  Consumption,  ,  .  .  .  ,  366 

CHAPTER   SECOND. 

OF  INDIVIDUAL  CONSUBIPTION. 

SECTION  I. 

Of  Individual  Consumption,  for  the  sakb  op  Rb-pboduction. 

Of  Consumption  of  Capital,         .....       370 
Of  Consumption  of  Labor.      .....  373 

SECTION  II. 

Op  Consumption  for  the  Gratification  of  Desirb. 

Of  Consumption  for  the  purpose  of  self-gratification,  simply,    .      379 
Consumption  in  respect  to  the  relative  Objects  of  Desire,    .  382 

CHAPTER  THIRD. 

OF   PUBUC  CONSUMPTION. 

SECTION  I. 
Of  Taxes,  or  the  manner  in  which    the  Public  Expenditure   is  pbovjdbb 

#^0R. 

Of  direct  and  indirect  Taxation,  ....       391 

Of  the  Principle  by  which  Taxation  should  be  regulated,    .  395 

SECTION  II. 

Of  the  purposbs    for  which  the  Public  Revenue  is  coAUfONir  Exfemcbd. 

Of  the  Expenses  of  Civil  Government,  .            .  398 

Expenses  for  PubHc  Education,  .                           399 

"             "    Maintaining  Religious  Worship,  .             ,       403 

•♦             "    National  Improvement,            .  4(14 

•*            "    Pauperjci               .             .  .      405 

«*            *•   War,                 ...  406 


ELEMENTS 


POLITICAL  ECONOMY. 


POLITICAL  ECONOMY. 

4^/ M  '■    • 


INTRODUCTION. 

DEFINITIONS,  AND  DIVISION  OF  THE  SUBJECT. 

1.  Political  Economy  is  the  Science  of  Wealth, 
i  It  IS  sometimes  defined  the  Science  of  National  Wealth. 
!    This  tlefinition  seems  not,  however,  sufficiently  compre- 

/  heiisive  ;  inasmuch  as,  the  laws  which  govern  the  crea- 

tion of  wealth  are  essentially  the  same,  whether  they 
are  considered  in  respect  to  man  as  an  individual,  or  to 
man  as  a  society. 

By  Science,  as  the  word   is   here  used,  we  mean  a 

^g^^         systematic  arrangement  of  the   laws  which  God  has   es- 

^  tablished,  so  far  as  they  have  been  discovered,  of  any 

^^  department  of  human  knowledge.     It  is  obvious,  upon 

,GAaX.      the  slightest  reflection,  that  the  Creator  has  subjected 

^^rfy^yythe  accumulation   of  the  l^l^.ailig?^  of  this  life  to  some 

,^^i_i   determinate  laws.     Every  one,  for  instance,  knows  that 

.   It     no  man  can  grow  rich,  without  industry  and   frugahty. 

'I  Political  I^conomy,  therefore,  is  a  systematic   arrange* 

7>v<l/v-  "^^'^^  °^  thefiaW'S  by  which,  under  our  present  constitu- 

^"7^    tion,  the  relations  of  man,  whether  individual  or  social, 

-  '-        to  the  objects  of  his  desire,  are  governed. 

2.  fVealth.     It  has   been  frequently  remarked,  that 
J             the  universe  around  us  is  composed  of  objects  suited  to 

Ct,  Of.     gratify  our  desire,  and   thus   minister  to  our  happiness. 
fC,    />/   The   capacity  to  gratify   desire,   is,  therefore,  the  first 

-  ('element  that  enters  into  our  notion  of  wealth.     But  aa 

-t.x.c    Zi    mi.  f^CLeJ  0' 


^^••" 


16  OF    VALUE. 


tlie  gratification  of  our  desires,  by  means  of  an  externai 
object,  almost  always  supposes  s^ime  change  effected 
in  that  object ;  and,  as  we  could  have  no  right  to  effect 
that  change,  unless  that  object  were  our  own,  another 
element,  which  enters  into  the  notion  of  wealth,  is  the  - 
idea  of  possession.  Hence,  wealth  may  be  defined  any 
obiorl,  having  the  power  of  gratifying  human  desire,  ^r''' 
which  is  capable  ot  being  appropriated.  He  who  pos-" 
sesses  many  of  these  objects  in  abundance,  is  termed 
rich.  He  who  possesses  few  of  them,  is  termed  poor. 
He  who  possesses  a  large  amount  of  money ^  is  also 
cnlled  rich  ;  because,  with  money,  he  can  generally 
procure  whatever  else  of  physical  convenience  he  may 
desire.  .  •  «. .' 

'3.  Of  value.,  intrinsic  and  er"'K"'rc"J>h.  The  par- 
ticular quality  in  any  jubsumce,  wl)ifn  tenders  it  capable 
of  gratifying  human  desire,  is  called  its  value.  Thus, 
that  quality  of  fuel,  which  constitutes  its  value,  is  its 
power  of  generating  heat,  or  of  gratifying  this  desire  in 
ninn.  A  particular  substance  may  have  the  power  of 
gratifying  either  one  or  several  desires,  and  thus  it  may 
iuive  either  one  or  several  values.  Thus  anthracite  coal 
is  at  present  known  to  have  but  one  value,  namely,  that 
of  generating  heat.  Bituminous  coal  possesses  also  an- 
other, as  it  is  also  used  in  the  manufacture  of  gas  for 
the  piiri)oses  of  illumination.  Wood  has  several  values, 
•nasmuch  as,  besides  being  used  for  fuel,  it  may  also  be 
used  for  building,  and  for  various  purposes  in  the  arts. 
Iron  lias  as  many  forms  of  value,  as  there  are  uses  to 
whicli  it  may  be  applied,  in  promoting  the  convenience 
of  man 

'I'he  degree  of  the  intrinsic  value  of  any  substance, 
fiep(^iids  upon  the  nature  and  the  number  of  the  desires 
which  it  can  gratify.  If  the  gratification  of  that  dcsiie 
to  which  it  is  subservient,  be  necessary  to  the  existence 
or  to  (he  comfort  of  man,  its  value  will  be  great.  Such 
is  tin,'  case  with  air,  water,  clothing,  food,  and  fuel.  If 
the  gra'ification  which  it  affords  can  be  easily  dispensed 
with,  its  value  will  be  small.  Such  is  the  case  with  ar- 
»i(li--  (if   luxury,  or   the    means    of  mere    amusement. 


OF    VALUE.  17 

The  inferiority  of  the  value  of  this  latter  class,  is  evi- 
dent  from  the  fact,  that,  in  seasons  of  scarcity,  these  are 
first  relinquished.  And  again,  the  degree  of  tiie  value 
of  any  suhslance,  depends  upon  the  number  of  desires 
which  it  can  gratify.  India  ] lubber,  or  Caoutchouc,  a 
few^  years  since,  was  used  but  for  one  purpose,  that  of 
rubbing  out  pencil  marks  It  is  now  used  in  the  manu- 
facture of  shoes,  and  for  several  other  very  important 
pui  poses.  The  intensity  of  its  value  is,  therefore, 
greatly  increased. 

We  have  thus  far  treated  only  of  intrinsic  value,  or 
of  the  power  which  any  particular  substance  possesses, 
of  gratifying  human  desire. . 

If,  however,  we  examine  the  various  articles  of  value 
around  us,  we  shall  observe  a  very  remarkable  difference 
between  them.  Some  of  them  may  be  made  the  means 
of  procuring  for  us,  by  exchange^  other  objects  of  desire. 
Such,  Tor  instance,  are  gold,  silver,  iron,  coal,  wood,  &c. 
He  who  possesses  a  large  quantity  of  either  of  these, 
may,  ordinarily.,  procure  for  himself,  by  exchange,  any 
thing  else  that  he  needs.  Others,  on  the  contrary,  and 
those  of  great  intrinsic  value,  are  destitute  of  this  prop- 
erty. What  has  greater  intrinsic  value  than  air,  the 
light  of  the  sun,  or  water  .''  Yet  we  can  get  nothing  in 
exchange  for  air  or  sun-light,  and  very  rarely  for  water. 
And  again  ;  substances  having  an  exchangeable  value, 
do  not  possess  that  value,  in  proportion  to  their  intrinsic 
value.  Iron  has  a  far  greater  intrinsic  value  than  gold  ; 
yet,  an  ounce  of  gold  has  a  far  greater  exchangeable  value 
dian  an  ounce  of  iron  ;  that  is,  an  ounce  of  gold  will 
procure  for  us  many  more  articles  of  convenience,  in 
exchange.  This  latter  property,  or  the  power  of  pro- 
curing for  us  something  else  in  exchange,  is  called  cx- 
changeable  value. 

If,  now,  we  compare  those  substances  which  have 
not,  with  those  which  have  exchangeable  value,  we  shall 
Qiid  them  to  differ  in  the  following  res])ects  : 

1.  Those  which  have  no  exchangeable  value,  are 
every  where  abundant  and  incxliauslible.  The  supj)ly 
of  the  others  is  limited  in  quantity  or  is  limited  in  place. 
2* 


18  OF    EXCHANGEABLE    VALUE. 

Air,  and  the  light  of  the  sun,  are  inexhaustible  every 
where.  Coal  is  in  some  places  inexhaustible,  but  it  is 
not  so  in  others.  Where  it  lies,  for  miles  together,  im- 
mediately upon  the  surface,  and  in  beds  of  unknown 
thickness,  it  has  no  exchangeable  value.  Where  it 
must  be  carried  to  any  distance,  to  be  brought  to  the 
consumer,  it  then  acquires  an  exchangeable  value. 

2.  The  value  of  the  first  class  of  substances  has  re- 
ceived no  addition  from  human  labor)^ut  derives  what- 
ever qualities  it  possesses,  directly  from  the  gift  of  God. 
The  value  of  the  other,  has  always  received  some  addi- 
tion, and,  frequently,  it  is  derived  altogether  from  human 
labor.  Neither  air,  nor  the  light  of  the  suh,  can  receive 
any  additional  power  of  gratifying  human  desire,  from 
any  effort  of  man.  On  the  contrary,  all  the  most  im- 
portant values  of  iron,  are  derived  from  human  skill. 
A  lump  of  iron  ore  is  as  valueless  as  granite  or  sand- 
stone. The  peculiar  properties  of  the  metal,  are  the 
result  of  the  processes  through  which  it  passes.  When, 
however,  a  substance  which  ordinarily  possesses  only 
intrinsic  value,  is  placed  under  such  circumstances  that 
human  labor  must  be  added  to  it  in  order  to  enable  it 
to  gratify  desire,  it  then  acquires  exchangeable  value. 
Thus  water,  which  ordinarily,  has  no  exchangeable 
value,  is  frequently  sold  by  the  gallon  in  cities,  because 
it  can  be  procured  in  purity  Oidy  from  a  distance,  and 
hence,  before  it  can  gratify  the  desire  of  particular  .indi- 
viduals, it  requires  the  labor  of  transportation  to  be 
added  to  it. 

We  see,  then,  that  every  substance  on  earth  may 
have,  and,  doubtless,  it  actually  has,  intrinsic  value.  If 
we  then  consider  all  those  qualities  which  are  necessary 
to  prepare  a  substance  for  the  gratification  of  luunan 
desire  to  be  intrinsic  values,  these  may  be  divided  into 
two  kinds  ;  first,  those  which  are  imparted  to  the  sub- 
stance by  the  immediate  act  of  God  ;  and,  second]^'-, 
those  that  are  imparted  to  it  through  die  intermediate 
agency  of  man.  The  former,  being  the  gift  of  God, 
are  gratuitously  received,  and  gratuitously  parted  with. 
The  latter  have  cost  human  labor,  and  therefore  cannot 


or    EXCHANGEABLE    VALUE.  19 

be  obtained  without  an  equivalent.  Hence  it  is  the 
latter  alone,  that  enter  into  computation,  in  fixing  ex- 
changeable value.  Thus  the  exchangeable  value  of  iron 
and  of  gold,  respectively,  does  not  depend  upon  the 
uses  to  which  these  metals  may  be  put,  but  upon  the 
labor  which  must  15e  employed  in  preparing  them  to 
gratify  desire. 

But  it  is  plain,  that  if  a  man  expend  labor  in  the 
creation  of  a  value,  this  labor  gives  him  a  right  to  the 
exclusive  possession  of  that  value  ;  that  is,  supposing 
the  original  elements  belonged  to  no  one  else.  Now,  as 
almost  all  the  qualities  which  gratify  human  desire,  can 
exist  only  by  the  exertion  of  this  labor,  it  follows,  that 
all  such  objects  must  have  already  become  the  exclu- 
sive possession  of  some  human  being.  Hence,  he  who 
wishes  to  possess  such  objects,  must  either  himself  ex- 
pend the  labor  necessary  for  producing  them,  or  else  he 
must  procure  them  by  voluntary  concession,  from  some 
one  who  has  already  expended  it.  But  he  who  has  ex- 
pended labor  upon  a  substance,  will  never  voluntarily 
surrender  it  up,  either  for  nothing,  or  for  that  which  he 
can  obtain  without  labor.  He  who  makes  knives,  will 
neither  give  them  away,  nor  exchange  them  for  air,  or 
water,  or  sun-light.  Hence,  he  who  wants  knives  must 
either  make  them  himself,  or  else  he  must  offer  the 
knife-maker,  in  exchange  for  them,  some  value  which  he 
himself  has  created.  Hence,  every  man  who  desires 
the  means  of  happiness,  must  labor  to  obtain  them. 
And,  as  every  man  has  his  preference  for  some  particu- 
lar kind  of  labor  ;  and  as,  moreover,  every  man  can 
succeed  better  by  confining  his  labor  to  one  thing,  than 
by  devoting  it  to  twenty  things,  every  man  is  desirous 
of  exchanging  some  portion  of  the  value  created  by 
himself,  for  that  created  by  others.  So  soon  as  this  is 
the  case  with  any  one  substance,  it  then  has  acquired 
exchangeable  value  :  that  is,  just  ?o  soon  as  other  men 
are  willing  to  give  me  a  value  which  they  have  cheated, 
for  that  which  I  have  created,  then  the  result  of  my  1^ 
bor  has  exchangeable  value,  and  not  before. 

The  degree  of  the  exchangeable  value   of  any  one 


20  OF    EXCHANGEABLE    VALUE. 

substance,  depends  chiefly  upon  the  amount  of  labor  and 
of  slcill  necessary  to  create  that  value.  No  one  would 
exchange  what  has  cost  him  two  days'  labor,  for  that 
which  has  cost  another  man  of  the  same  skill,  but  one 
day's  labor  ;  because,  rather  than  make  such  an  ex- 
change, he  would  create  this  secoUd  value  for  himself. 
Thus,  if  a  hundred  pounds  of  fish  could  be  procured  by 
a  day's  labor,  and  only  twenty-five  pounds  of  venison  , 
men  would  exchange,  not  pound  for  pound,  but  labor  for 
labor  :  that  is,  at  the  rate  of  four  pounds  of  fish  for  one 
pound  of  venison.  The  amount  of  labor  expended  in 
the  creation  of  a  value,  is  commonly  denominated  its 
cost.  This  is  always  the  standard  by  which,  for  long 
periods,  the  degree  of  exchangeable  value  may  be  esti- 
mated. 

When,  however,  we  here  speak  of  labor,  we  speak 
of  it  as  simple  labor  ;  that  is,  without  taking  into  con- 
sideration the  degree  of  skill  which  may  be  combined 
with  it,  or  the  other  circumstances  which  may  conspire 
to  create  variation  in  its  value.  These  are  to  be  con- 
sidered hereafter.  We  suppose,  in  the  remarks  above, 
that,  in  all  cases,  labor  of  the  same  kind  is  to  be  com- 
pared together. 

I  have  said  above,  that  cost  forms  the  standard  by 
which  the  degree  of  exchangeable  value  for  long  periods 
is  to  be  estimated.  Temporary  circumstances  may  cre- 
ate a  variation  from  this  standard  ;  and  may,  for  a  short 
time,  elevate  this  value  above,  or  depress  it  below,  the 
cost.  These,  however,  can  continue  to  operate  but  for 
a  short  period  ;  the  tendency  of  exchangeable  value  is 
always  to  gravitate  towards  cost.  The  causes  of  this 
variation,  we  will  now  briefly  illustrate  : 

1.  Suppose,  that  by  the  use  of  better  tools,  or  from 
any  other  cause,  the  supply  of  fish  became  more  abun- 
dant, so  that  a  man  could,  by  one  day's  labor,  procure 
two  hundred  instcac^  gf  one  hundred  pounds.  The 
hunter  would  not  then  be  willing  to  exchange  as  before, 

«"nre  he  would   now  rather  catch  fish  for  himself.      He 
oiild  demand  eight  pounds  of  fish  for  one  pound  of  veni- 
son :  that  is,  the  exchangeable  value  of  fish  would  fall ;  or, 


OF    EXCHANGEABLE    VALUE.  21 

in  other  words,  it  could  not  procure  a*much  venison  in 
exchange  as  it  did  before.  But  as,  in  consequence  of 
this  reduction  in  price,  there  would  be  an  increased  de- 
mand for  fish  ,  that  is,  more  persons  would  want  it,  and 
thej-  would  also  want  a  larger  quantity  than  before,  the 
fisherman  would  not  be  obliged  to  exchange  at  half  the 
former  rate,  but  would  be  able  to  exchange  at  a  rate 
somewhat  above  it ;  say,  perhaps,  six  or  seven  pounds 
for  a  pound  of  venison.  Thus,  bath  parties  would  be 
gainers.  The  fisherman  would  procure  more  venison  ; 
the  hunter  more  fish,  by  a  day's  labor.  Thus,  a  benefit 
to  one,  is  a  benefit  to  all.  And  thus  we  see,  that,  other 
things  being  equal,  the  greater  the  supply  of  any  article, 
the  less  is  its  exchangeable  value  ;  that  is,  the  less 
amount  of  other  things,  can  it  procure  in  exchange. 

2.  Supposing  the  labor  necessary  for  taking  fish  to  be 
doubled  ;  so  that,  by  the  labor  of  a  day,  no  more  than 
fifty  pounds  could  be   procured.      The  fisherman,  then, 
would   not   sell,  as  at   first,  four  pounds  of  fish  for  one 
pound  of  venison  ;    he  would   rather    hunt   venison   for 
himself.     He  would  offer  but  two  pounds  of  fish  for  a 
pound  of  venison.      But  as,  at  this  rate,  the  number  of 
his    customers    would    be    greatly   diminished  ;    and    a? 
every  person  would  use  less  fish  than  before,  he  would 
find  it  difficult  thus  to  dispose  of  the  results  of  his  labor, 
and  would  be  obliged  to  offer  it  on  more  favorable  terms 
say  two  and  a  half,  or  three  pounds,  for  a  pound  of  veni 
son  ;  thus,  with  a  day's  labor,   he  would  procure  les' 
venison,  and    the    hunter   less  fish.      That   is,   the  evi 
would  be  shared  between  them  ;  and  thus,  an  injury  t< 
one,  is  an  injury  to  all.      Thus,  other  things  being  equal 
the    less   the  supply,  the  greater  is    the    exchangeabh 
value. 

3.  Suppose  the  labor  necessary  for  procuring  fish 
remain  the  same,  but  that,  from  some  cause,  twice  as 
many  persons  desired  fish  as  before.  Suppose  thai 
every  person  desired  five  pounds,  but  tnat  there  was 
only  enough  to  supply  half  the  population  uith  this 
quantity.  Then  there  would  arise  a  competition  among 
the  buyers,  and  he  who  obtained   this  quantity  must  ob- 


23  OF    EXCHANGEABLE    VALUE. 

tain  it  by  overbidding  his  neignoor.  Thus,  fish  would 
command  a  larger  amount  of  venison  in  exchange  tlian 
before  ;  that  is,  the  exchangeable  value  of  fish  would 
rise,  and  it  would  continue  at  this  ])oint,  until  the  demand 
decreased,  or,  until  a  sufficient  number  of  men  devoted 
themselves  to  fishing,  to  furnish  enough  to  reduce  it  to 
its  mean  exchangeable  value.  Thus,  the  greater  the 
demand,  the  greater  the  exchangeable  value. 

4.  Suppose,  that,  while  the  labor  of  taking  fish  con- 
tinued as  before,  the  number  of  purchasers  was  from 
any  cause  diminished,  so  that,  while  there  was  fish 
enough  caught  to  supply  every  person  with  five  pounds, 
only  half  the  population  wanted  any.  In  this  case,  as  a* 
large  residue  would,  at  the  close  of  every  day,  be  left  on 
the  fisherman's  hands,  there  would  be  a  con)[)etition 
among  the  sellers  ;  and  each  one  would  be  desirous  of 
disposing  of  his  stock  at  a  diminished  price,  rather  than 
lose  It  altogether.  Hence,  he  would  offer  to  exchange 
it  for  a  less  amount  of  venison  than  before  ;  that  is,  the 
exchangeable  value  of  fish  would  fall.  It  would  remain 
at  this  point,  until  either  the  demand  arose  to  its  natural 
rate  ;  or  a  sufficient  number  of  persons  turned  their  "at- 
tention to  some  other  occupation,  to  reduce  the  supply 
to  a  level  with  the  demand.  Thai  is,  the  su])])Iy  being 
the  S'-tme,  the  less  the  demand,  the  less  the  exchangeable 
value 

It  is  the  operation  of  these  principles  that  keeps  the 
supply  of  any  article  throughout  the  world  always  equal 
to  tlie  demand  ;  and,  it  is  surprising  to  obseive,  with 
what  accuracy  this  effect  is  produced.  In  the  largest 
cities,  there  is  always  just  enough  butcher's  meat  and 
vegetables,  and  clothing,  to  supply  the  wants  of  the  in- 
habitants, and  no  more.  The  moment  the  })rice  of  ar» 
article  falls  below  cost,  it  ceases  to  be  produced,  until 
the  price  rises.  As  soon  as  it  rises  above  ordinary 
profit,  capital  and  labor  are  directed  to  it,  and  it  is  pro- 
duced in  sufficient  quantity  to  meet  the  unusual  deniand. 
Thus,  also,  we  see  why  the  high  price  of  any  article  is 
connnonly  followed  by  a  low  price  of  the  same  article, 
and  the  contrary.     When   the  price  of  any  article  is 


OP    EXCHANGEABLE    VALUE.  23 

low,  men  leave  off  this  kind  of  production  in  too  great 
numbers,  and  lience  follows  a  comparative  scarcity  of 
the  product  which  they  furnish.  When  the  price  is 
high,  men  rush,  in  too  great  numbers,  into  this  sort  of 
production,  and  hence  arises  a  temporary  glut,  and  a 
depreciation  of  its  exchangeable  value. 

Again  :  it  will  be  seen  that  this  variation  in  the  ex- 
changeable value  of  any  article,  is  dependent  greatly  on 
its  perishableness.  An  article  which  is  not  liable  to  be 
destroyed  by  keeping,  will  neither  fall  so  rapidly,  nor  so 
low,  by  either  a  diminution  of  demand,  or  an  increase 
of  supply,  as  one  which  is,  in  its  nature,  rapidly  perish- 
able. Thus,  iron  may  be  kept  for  years,  without  decay ; 
and  hence,  its  exchangeable  value  cannot  greatly  vary, 
in  consequence  of  increase  of  supply  or  decrease  of  de- 
mand :  that  is,  it  is  an  article  not  liable  to  great  or  sud- 
den fluctuation.  On  the  contrary,  fish,  fruits,  and  ar- 
ticles of  this  nature,  very  often,  in  the  course  of  a  few 
days,  vary  one  or  two  hundred  per  cent. 

Another  source  of  variation  in  the  exchangeable  value 
of  products,  is  the  time  necessary  for  their  production. 
When  any  amount  of  a  commodity  may  be  quickly  pro- 
duced, its  rise  of  price  will  not  keep  pace  with  the  in- 
creased demand  ;  because,  every  one  will  know  that,  by 
waiting,  he  can  be  provided  with  it  at  a  reasonable  price. 
Thus,  a  small  rise  of  price  in  a  manufactured  article, 
when  the  material  is  abundant,  will  cause  the  quantity 
produced  to  be  greatly  increased  ;  hence,  the  rise  is 
never  excessive.  But  when  a  long  time  is  necessary 
for  the  production  of  an  article,  and  it  is  an  article  of 
prime  necessity,  the  rise  of  price  is  frequently  great. 

And  again  :  It  will  be  seen,  that,  so  far  as  the  seller 
and  the  buyer  are  concerned,  these  variations  balance 
each  other.  When  products  rise  on  the  merchant's 
hands,  he  charges  an  additional  price  ;  when  they  fall, 
he  is  obliged,  fiequently,  to  sell  at  a  reduced  jirofit,  or 
even  to  sell  below  cost.  The  gain,  in  one  case,  makes 
up  for  the  loss  in  the  other.  Hence,  as  no  one  sym[)a- 
ihizes  with  the  merchant,  when  he  sells  at  a  loss,  no  one 
should  complain,  when  he  sells,  for  a  short  time,  at  more 
dian  an  ordinary  gain. 


24  OF    EXCHANGEABLE    VALUE. 

If,  now,  we  sum  up  what  has  been  said,  we  shall  c  ome 
to  the  following  general  conclusions  : 

1.  Cost;  that  is,  labor  bestowed,  is  the  foundation 
of  exchangeable  value,  and  from  this,  it  can  never,  for 
long  periods,  materially  vary  :  that  is,  an  article  can  al- 
ways be  had  for  what"  it  costs  to  produce  it ;  including 
in  this,  the  ordinary  profit  to  the  producer.  Notwith- 
standing this,  there  will,  however,  arise  various  fluctua- 
tions, depending  upon  the  following  circumstances  : 

Other  things,  then,  being  equal  — 

2.  The  greater  the  supply,  the  less  the  exchangeable 
value. 

3.  The  less  the  supply,  the  greater  the  exchange- 
able value. 

4.  The  greater  the  demand,  the  greater  the  ex- 
changeable value. 

5.  The  less  the  demand,  the  less  the  exchangeable 
value. 

6.  And,  in  general,  cost  being  fixed,  exchangeabl( 
value  is  inversely  as  the  supply,  and  directly  as  the  de 
mand. 

7.  Or,  still  more  generally,  at  any  particular  time 
exchangeable  value  will  be  as  the  Gost,  plus  ftiie  efFeo 
produced  by  the  variation  in  supply  and  demand. 

Ar:    f\   ;.'  Hence,  wealth  consists  of  all  objects  which  have  a* 
v^    Cf\i/  exchangeable  value.  ^^o^ 

>S'    J^^,       Exchangeable    value    is    slightly  distinguishable  fron*''   ^ 
J''  «.''''    !^    price.      The  first,  is  the  power  which  any  object  pos- 
\^  .  sesses  of  procuring  for  us  any  object  whatever.      Th» 

^J^  second,  price,  is  the  power  that  it  has  to  procure  for  ufc 

one  particular  object ;  that  is,  money. 

Of  Production.  From  what  has  been  said,  it  is  eas) 
to  explain  the  nature  of  Production.  It  is  the  act  b) 
which  we  confer  a  particular  value  upon  any  cbjeci 
whatever,  or  by  which  we  give  to  any  object  its  adapt- 
edness  to  gratify  desire.  We  can  neither  create  nor 
annihilate  any  thing.  All  that  we  can  do,  is,  to  modify 
what  already  exists.  When  we  so  modify  any  thing, 
that  it  is  cajjable  of  gratifying  a  desire  which  before  M 
was  not  capable  of  gratifying,  our  so  doing  is  called  pro 
duction  // 


OF     PRODUCE EXCHANGE.  25 

The  modifications  which  objects  need,  in  order  to 
render  them  capable  of  gratifying  desire,  are  various. 
Sometimes-  the  elements  of  the  substance,  sometimes  its 
form.)  and  sometimes  its  place,  require  be  to  changed. 
Whenever  human  industry  accornpHslies  any  of  these 
resuhs,  it  is  called  production  ;  the  person  who  exerts 
this  agency  is  called  a  producer ;  and  the  substance 
Itself,  on  which  this  agency  is  exerted,  is  called  a  prod- 
uct. 

In  some  cases,  we  find  the  substance,  as,  for  instance, 
ore  in  the  mine,  or  stone  in  the  quarry,  in  its  natural 
state  ;  in  others,  we  receive  it  from  those  who  have  im- 
parted to  it  one  value,  and  we  add  to  it  another.  The 
material  which,  in  either  case,  we  obtain  for  the  purpose 
of  combining  it  with  our  own  industry,  and  forming  it 
into  a  product,  is  called  capital ;  and,  after  the  labor  has 
been  exerted,  and  the  value  created,  it  is  called  a  prod- 
uct. Thus,  the  same  article  may  be  product  to  one, 
and  capital  to  another.  Leather  is  the  product  of  the 
currier,  and  the  capital  of  the  shoemaker. 

The  term  capital  is  not  merely  applied  to  the  material 
on  which  industry  is  to  be  exerted,  but  also  to  all  the 
instruments  by  which  human  industry  is  assisted  ;  as 
well  as  to  whatever  is  necessary  to  the  support  of  that 
industry. 

Of  Exchange.  I  have  said,  above,  that  the  mode  of 
every  man's  industry  is  decided  by  his  i:idividual  tastes 
and  circumstances.  It  is  commonly,  however,  confined 
to  the  creation  of  one  kind  of  product,  inasmuch  as  it 
is  thus  vastly  more  available.  His  desires,  on  the  other 
liand,  are  as  innumerable  as  the  objects  created  to  gratify 
them.  He  creates  but  one  value  and  he  wants  a  thou- 
sand. Hence,  he  can  be  gratified  by  means  of  no  less 
than  nine  hundred  and  ninety-nine  exchanges.  He  thus 
parts  with  various  portions  of  the  value  which  he  has 
created,  for  the  sake  of  obtaining  the  val.ies  which  others 
have  created.  Hence  the  necessity  of  universal  and 
ceaseless  exchange.  Hence  also  the  reason  why  so 
large  a  portion  of  mankind  devote  themselves  to  the 
business  of  effecting  exchanges.      Those  who  do  so,  are 


2Q  DISTRIBUTION CONSUMPTION 

called  mtrcJiants.  Those  who  are  employed  in  the 
transportation  of  wares  or  merchandise  by  sea  or  by 
land,  are  also  engaged  in  effecting  the  game  object. 

Of  Distribution.^  In  even  the  very  first  stages  of 
society,  it  is  found  that  the  productive  result  of  human 
power  is  greatly  increased  by  union  of  effort  and  division 
of  labor.  Ten  men,  laboring  together,  can  accomplish 
much  more  than  ten  men  laboring  separately.  Specially 
is  this  the  case  where  the  various  parts  of  a  process  are 
divided,  and  each  one  performs  that  part  for  which  he  ig 
best  adapted.  And,  as  capital  accumulates,  it  is  com- 
monly the  case,  that  one  who  owns  the  capital,  unites  in 
production  with  another  or  others,  who  perform  the  labor. 
When  the  product  is  realized,  and  the  gains  are  to  be 
divided,  some  equitable  law  is  to  be  adopted,  in  the  dis- 
tribution. Difl'erent  laborers  are  entitled  to  dissimilar 
wages  :  and  there  are  just  proportions  to  be  observed 
between  the  wages  of  labor  and  the  wages  of  capital. 
The  principles  of  this  adjustment  are  treated  of,  by 
Political  Economists,  under  the  head  of  Distribution. 

Of  Consumption.  Suppose,  now,  the  value  to  be 
created,  and  brought  within  the  reach  of  him  who  desires 
it ;  he  uses  it,  and,  in  the  very  act  of  use,  its  value  is 
destroyed.  We  exchange  labor,  or  money,  or  wheat, 
for  fuel ;  we  use  the  fuel  in  our  fire  places,  and  its  value 
is  destroyed.  We  purchase  bread  ;  we  eat  it,  and  its 
value  ceases  forever.  A  baker  purchases  flour,  and 
makes  it  into  bread ;  the  flour  ceases  to  be  flour :  its 
value,  in  this  respect,  is  gone  forever.  This  act,  by 
whicii  we  annihilate  any  particular  value,  is  called  con- 
sumption. It  is  exactly  the  op))Osite  to  production. 
Sometimes  the  utility  is  destroyed,  with  no  other  lesull 
than  merely  the  gratification  of  desire.  Such  is  the  case 
with  fire-works,  shows,  and  amusements  of  almost  every 
sort.  At  other  times,  the  value  or  utility  is  destroyed  ; 
but  it  re-appears,  in  another  and  much  more  valuable 
form.  'JMius,  a  side  of  sole  leather  is  cut  up  into  soles,  for 
shoes:  its  value,  as  a  side  of  sole  leathci,  is  destroyed 
forever;  but  its  value  re-appears,  in  another  form,  and 
with  an  increased  exchangeable  value.      The  food  which 


DIVISION    OF    SUBJECT  27 

we  eat,  disappears;  but  its  value  re-appears,  in  re-animated 
health  and  vigor,  by  which  we  are  prepared  for  subse- 
quent labor.  Tlie  former  is  termed  unproduclive,  the 
latter,  productive  consumption.  -t) 

Tlie  whole  si  bject  of   Tolit'cal   Economy,  may    bo   ' 
therefore  divided  into  four  parts. 

The  First  Part  treats  of  Production,  or  the  laws 
which  govern  the  application  of  labor  to  capital  in  tho 
creation  of  value. 

The  Second,  or  Exchange,  treats  of  the  principles 
which  govern  men,  when  they  wish,  by  means  of  their 
own  labor,  to  avail  themselves  of  the  labor  of  others. 

The  Third,  or  Distribution,  treats  of  the  laws  by 
which  those  who  have  united  in  the  creation  of  a  prod- 
uct, receive,  respectively,  their  portion  of  the  result. 

'JMie  Fourth,  or  Consumption,  treats  of  the  laws 
which  should  govern  us  in  the  destruction  of  value. 

Each  of  these  subjects  will  be  treated  of,  in  the  above 
order,  in  the  following  work. 


BOOK  FIHST. 


PRODUCTION. 

It  is  obvious  that  when  man  was  first  created,  there 
existed  nothing  but  this  earth,  with  its  various  substances, 
their  quahties  and  relations  ;  and  man,  with  his  various 
physical,  intellectual,  and  moral  powers.  The  difference 
between  the  present  stale  of  man  and  of  the  universe 
around  him,  and  the  original  state,  consists  in  this  :  that 
the  qualities  and  relations  of  things  have  now  been  dis- 
covered, and  rendered  available  to  the  service  of  man ; 
and  the  intellect  of  man  has  been  cultivated,  and  his 
skill  improved,  so  that  he  is  able,  more  successfully,  to 
avail  himself  of  these  qualities  and  relations.  And  it  is 
also  obvious,  that  this  change  in  the  external  world  has 
been  produced  by  the  physical  and  intellectual  faculties 
of  man  ;  that  is,  by  human  industry.  The  whole  wealth 
of  the  world  has  been  created  by  the  union  of  human 
industry  with  the  materials  which  God  had  originally 
spread  around  us.  Hence,  all  that  is  necessary  to  the 
creation  of  wealth,  is  capital  and  industry.  But,  it  is 
also  obvious,  that  the  application  of  industry  to  the  ma- 
terials around  us,  that  is,  to  capital,  has  not  been  at  all 
limes  either  equally  strenuous,  or  equally  successful. 
There  must,  therefore,  exist  some  rules,  by  which  this 
application  of  industry  to  capital  is  governed,  and  some 
conditions  under  wliich  it  is  more  successfully  exerted, 
than  under  others. 

The  subject  of  Production  is,  therefore,  naturally  di- 
vided into  three  parts.  1st.  Capital.  2d.  Industry. 
3d.  The  principles  by  which  the  application  of  industry 
to  capiUil  is  governed. 


l^V*" 


CHAPTER  FIRST. 

OF    CAPITAL. 

First.  The  nature  cf  Capital.  The  word  capital 
is  used  in  two  senses. 

When  used  in  relation  to  product,  it  means  any  sub- 
stance on  which  industry  is  to  be  exerted.     Aflei   that 
industry    has    been    exerted^   it    then    becomes    product. 
Thus,  leather  is  the  capital  of  the  shoemaker,  and  shoes 
,  j^^'  are  his  product. 

When  used  in  relation  to  industry,  however,  it  has  a 
much  wider  signification.  It  then  signifies  the  material 
on  which  industry  is  about  to  confer  value,  that  on  which 
it  has  conferred  value,  and  the  instruments  which  are 
used  for  the  conferring  of  value,  as  well  as  the  means 
of  sustenance^  by  which  the  being  is  supported  whilst  he 
is  engaged  in  performing  the  operation.  The  capital  of 
an  individual,  if  it  be  examined,  will  be  found  to  be 
composed  of  all  these.  Thus,  also,  the  capital  of  a 
nation  is  composed  of  raw  material,  of  articles  ready  to 
be  consumed,  of  buildings,  ships,  manufactories,  and 
also  of  the  various  substances,  by  which  human  life  is 
prolonged  and  rendered  desirable. 

Second.  The  forms  of  Capital.  Hence  it  must 
be  seen  that  the  forms  of  capital  must  be  as  various  as 
the  various  employments  of  man. 

1.  The  Farmer  possesses  seed,  manure,  breeding 
animals,  &c. 

The  Manufacturer  possesses  cotton,  wool,  /lax,  iron, 
leather,  wood,  and,  in  general,  all  the  material  on  which, 
according  to  his  particular  calling,  he  desires  to  exerl 
his  industry. 

The  J\hrchant  possesses  sugar,  tea,  cofleo,  iron,  &c. 
or  the  various  substances  to  which,  by  transportation,  he 
has  added,  or  to  wliicli  he  intends  to  add,  value. 


CHANGES    OF    CAPITAL.  31 

2.  But,  in  order  to  effect  this  intended  creation  of 
value,  it  is  found  tliat  intermediate  agents  must,  in  all 
these  cases,  be  employed.  A  farmer  coidd  not  reap 
with  his  fingers,  nor  a  miner  dig  with  his  hands,  nor  a 
manufacturer  labo:  withoat  tools.  All  these  instruments, 
the  use  of  which  is  necessary  to  the  creation  of  value, 
are,  therefore,  also  termed  capital. 

Thus,  the  ploughs,  harrows,  spades,  carts,  and  work- 
ing animals  of  the  farmer,  are  a  part  of  his  capital.  To 
the  same  class  also,  perhaps,  belongs  his  land. 

The  axes,  planes,  hammers,  of  the  mechanic,  and  the 
buildings  and  machinery  of  the  manufacturer,  are  their 
capital. 

Under  this  division  of  capital  may  also  be  included 
the  ship  of  the  merchant,  the  wagon  of  the  teamster, 
and  the  railroad  and  locomotive  of  the  proprietor. 

3.  But,  besides  all  this,  these  several  persons  must 
be  fed  and  clothed,  whilst  they  are  exerting  the  indus- 
try by  which  value  is  given  to  these  various  products. 
Hence,  under  the  head  of  Capital,  must  be  comprehended 
all  the  various  kinds  of  food,  the  clothing,  and  houses, 
which  are  necessary,  in  order  to  give  sustenance  to  a 
human  being.  These  are  generally  the  same,  in  all 
kinds  of  indurtry. 

4.  And,  lastly,  every  individual,  in  each  of  these 
departments  of  human  industry,  will  retain  some  portion 
of  the  product  which  he  has  created,  but  which  he  is 
ready  to  part  with  for  something  else.  The  farmer  has 
grain,  which  he  has  raised  ;  the  manufacturer,  cloth, 
which  he  has  Hibricated ;  the  merchant,  commodities, 
which  he  has  imported  or  bought  for  sale.  These  form 
another  item  of  capital. 

Third.  Of  the  changes  which  Capital  undergoes. 
From  what  has  been  already  said,  it  is  evident,  that 
capital  derives  its  value  from  labor,  and  that  the  effect 
of  labor  exerted,  is  to  produce  some  change  in  it 
Hence,  capital,  in  every  industrious  country,  must  be 
always  undergoing  changes ;  and  hence,  also,  it  fre- 
quentlv  re-appears,  in  forms  very  different  from  those  in 
which  it  at  (irsl  existed.      The  form,  however,  is  of  no 


32  CHANGES    OF    CAPITAL. 

consequence,  if  a  superior  value  be  the  result.  Political 
Economy,  unmnidful  of  the  form,  looks  only  at  an  aug- 
mentation, either  of  the  amount,  or  of  the  degree  of 
value. 

1.  The   material  undergoes  changes. 

The  seed  and  manures  of  the  farmer  are  changed 
mto  vegetables,  and  these  again  into  the  grain  of  the 
harvest. 

The  cotton  and  wool  of  the  manufacturer  are  changed 
mto  the  fabrics  which  he  produces.  The  wood  and 
nails  of  the  carpenter  are  changed  into  houses. 

The  commodities  of  the  merchant  undergo  changes. 
He  exports  cotton,  rice,  wheat,  or  manufactures ;  and 
imports  calicoes,  silks,  wine,  hardware,  &c. 

2.  The  instruments,  or  machinery,  employed  by 
these  several  classes  of  persons,  undergo  changes. 
These  several  instruments,  in  the  course  of  production, 
are  gradually  destroyed,  or  consumed.  The  plough  and 
cart,  and  animals  of  the  farmer,  the  tools  of  the  me- 
chanic, the  machinery  of  the  manufacturer,  and  the  ships 
and  vehicles  of  the  merchant,  are  worn  out  and  rendered 
worthless.  But  if  they  have  been  profitably  used,  they 
have  re-a])peared,  in  the  increased  value,  which  they 
tave  conferred  upon  the  various  objects  upon  which  they 
have  been  employed. 

3.  The  various  kinds  of  food,  clothing,  and  shelter, 
necessary  for  the  existence  and  comfort  of  the  human 
being,  are  also  changed.  They  are  consumed,  from 
time  to  time,  and  their  value  re-appears,  in  that  new 
vigor  imparted  to  his  body  and  mind,  which  forms  i 
fresh  capital,  to  be  employed  again  in  the  work  of  pro- 
duction. 

4.  And  lastly  :  The  mature  product  of  every  laborer 
is  constantly  changing.  As  soon  as  he  has  created  a 
product,  he.  is  anxious  to  dispose  of  it  to  some  one  else, 
that  he  may  invest  its  increased  value  in  some  other  ma- 
terial which  he  may  again,  with  increased  advantage, 
unite  with  industry.  As  soon  as  the  farmer  has  raised 
^rain  or  fat  cattle,  he  wishes  to  disi)osc  of  them,  that  he 
may  invent  their  value  again  in  seed,  or  manure,  or  agrl- 


INCREASE    OF    CAPITAL.  33 

cultural  improvements.  As  soon  as  the  manufacturei 
has  finishctl  his  fabric,  he  cxciianges  it  for  the  means  o( 
subsistence,  materials,  or  machinery;  and  so  of  the 
merchant,  and  of  every  other  laborer. 

We  see,  then,  that  capital  is  undergoing  perpetual 
changes,  and  that  the  course  of  these  changes  is  con- 
stantly from  a  state  of  less,  to  a  state  of  greater  value  ; 
that  is  from  a  state  more  remotely  adapted  to  the  grati- 
fication of  human  desire,  to  a  state  less  remotely  adapted 
to  it ;  and  that  so  soon  as  it  has  become  precisely 
adapted  to  this  gratification,  its  change  ceases,  and  it  is 
consumed  in  some  mode  or  other.  And  if  it  be  profit- 
ably consumed  it  again  re-ajipears  in  some  form  adapted 
to  create  a  further  increase  of  the  means  of  enjoyment. 
And  hence  we  see,  that,  that  country  is  the  most  pros- 
perous which  is  the  most  rapidly  accumulating,  by  the 
results  of  its  labor,  the  greatest  amount  of  these  ultimate 
products,  in  proportion  to  the  number  of  its  inhabitants. 
The  greater  the  share  of  these  products  which  falls  to 
the  lot  of  each  individual,  the  greater  are  the  means  of 
physical  happiness  in  his  possession. 

Fourth.  The  increase  of  Capital.  In  all  these 
changes  which  we  have  considered,  it  is  always  to  be 
remarked,  that  there  is,  in  the  very  act  of  change,  a 
destruction  of  value.  He  who  changes  iron  into  steel, 
consumes  the  iron,  destroys  that  particular  value  and 
creates  another  in  its  place.  He  who  sows  wheat,  de- 
stroys the  value  of  that  wheat,  for  food  ;  and  he  who 
spins  cotton,  destroys  the  value  of  cotton  wool  as  cotton 
wool.  That  is,  neither  of  these  substances  can  ever  be 
used  again  for  the  purposes  to  which  they  were  before 
adapted.  If,  however,  the  industry  of  the  'aborer  have 
been  skilfully  directed,  the  product  will  have  acquired 
an  exchangeable  value  sufficient  to  replace  the  original 
material  in  additional  quantity,  and  also  to  repay  him  for 
his  labor,  and  pay  the  interest  of  his  capital.  The 
amount  of  diderence  between  the  exchangeable  value  of 
his  original  material,  together  with  his  labor,  and  the  ex- 
changeable value  of  his  product,  is  his  profit.  The 
annual  amount  of  these   profits,  is  his  annual  gross  rev 


^ 


34  INCREASE     OF     CAPITAL. 

enue.  The  annual  amount  of  these  profits  in  a  nation, 
is  the  gross  national  revenue. 

It  is  obvious,  that  it  matters  not  in  what  form  capital 
re-appears,  if  it  only  re-appear  in  a  form  bearing  a  great- 
er exchangeable  value.  The  sinith  exchanges  geld  or 
silver  for  coal  ;  he  burns  up  his  coal,  and  nothing  is  left 
but  ashes.  But  it  has  produced  an  invisible  substance, 
called  caloric,  by  means  of  which  he  has  been  able  to 
give  such  an  increased  value  to  iron,  as  will  not  only  re- 
place his  gold  and  silver,  but  also  the  iron  itself,  and  will 
also  pay  him  for  his  labor.  The  farmer  exchanges  his 
gold  or  silver  for  manure,  but  this  manure  will  so  increase 
his  harvest,  that  he  will  be  able  to  replace  his  gold  and 
silver,  and  also  be  abundantly  repaid  for  his  labor.  The 
principle  is  the  same,  in  all  cases  of  change  of  capital. 
Jt  matters  not  into  what  we  change  our  capital,  nor  how 
valuable  the  substance  may  be  that  is  exchanged,  if"  we 
only  receive,  in  return,  a  greater  amount  of  exchange- 
able value,  or  that  which  will  procure  for  us  a  greater 
amount  of  objects  of  desire. 

We  see,  hence,  in  what  manner  nations  and  individu- 
^Js. grow  rich.  It  is  by  uniting  the  industry  of  (his  year 
to  the  capital  of  last  year,  anqbyHiis  process,  creating 
an  augmentiition  of  capital.  This  augmentation  will  be 
either  greater  or  less,  in  proportion  as  our  industry  has 
been  successful  in  giving  additional  value  to  that  value 
which  previously  existed.  If  we  destroy  a  value,  and 
"produce  another  only  equal  to  it,  we  lose  our  labor.  If 
we  destroy  a  value,  and  re-produce  nothing,  we  lose 
both  labor  and  capital.  It  is  only  as  the  value  created 
IS  superior  to  the  value  of  labor  and  capital  consumed, 
that  we  are   enriched.      Henco   ^^  o   see,  that  wealth  is 

acquired  by  small,  but  oft  repeated  accumulatlon^j, The 

gross  niiioiiiit  of  these  acciiiuulations  w  ill  he  decided  by 
ot;r  skill  jmd_ industry-  But,  as  from_iliis  amouut  our 
vaiious  expenditures  must  be  subtracted,  our  nett  reve- 
nue will  depend  not  only  on  our  skill  and  industry,  hiit 
also  on  our  frugality.  Though  a  man  earn  much, 
yet,  if  he  spend  all,  he  will  grow  no  richer.  Hence, 
induslnj  and  frugalihi  are_  the  great  sources  of  wealth 


OF    PRODUCTIVE    AND    UNPRODUCTIVE    CAPITAL.    35 

Nor  is  this  the  less  true  of  nations.  Hence  it  Is,  that 
wars,  unnecessarily  expensive  governments,  or  high  tax- 
es for  whatever  purpose,  may  keep  the  most  enterprising 
and  industrious  nation  always  poor. 

Fifth.      Of  Productive  and  Unjn'oduclwe  Capital. 

Productive  capital  is  that,  which,  being  in  any  man- 
ner united  with  industry,  is  in  tbe  process  of  augmenta- 
tion. Unproductive  capital  is  that,  which,  not  being 
united  with  industry,  remains,  at  the  end  of  the  year, 
just  the  same  as  it  was  at  the  beginning.  Money  at 
interest,  capital  undergoing  the  various  transformations 
effected  by  industry,  tilled  land,  and  manufactories  in 
operation,  are  productive  capital.  Money  lying  in  cof- 
fers, materials  unsaleable,  manufactories  unoccupied,  and 
land  lying  waste,  are  unproductive  capital. 

When  capital  is  unproductive,  it  may  be  considered 
as  losing  for  us,  annually,  its  ordinary  rate  of  interest ; 
because  it  must  have  been  purchased  with  that  which 
would  have  yielded  that  interest.  Hence  it  is,  that 
every  sound  economist  is  anxious  to  have  the  whole  of 
his  capital  productively  invested.  He  who  acts  other- 
wise, is  ignorant  of  the  princi]jles  of  production,  indo- 
lent, or  slovenly.  The  farmer  who  allows  a  heap  of 
manure  to  lie  in  his  farm  yard  for  a  year,  instead  of 
spreading  it  on  his  land  ;  the  merchant  who  allows  his 
ships  to  lie  idle,  or  his  goods  to  be  scattered,  unsold, 
over  several  warehouses  ;  or  the  manufacturer  who  owns 
twice  as  much  machinery  as  he  is  able  to  employ,  are 
annually  losing  all  the  accumulation  which  this  capital, 
properly  invested,  would  produce.  And  still  more,  as 
we  have  seen  that  all  gains  arise  from  small  and  suc- 
cessive accumulations,  and  as  almost  every  product  is 
hable  to  waste,  it  is  manifest  that  habitual  negligence  of 
this  sort  must  greatly  diminish,  if  it  do  not  entirely 
consume,  all  the  nett  revenue  of  an  establishment.  The 
eilbrt  of  every  man  should  be,  to  unite  every  fraction  of 
his  capital  with  industry,  and  to  kcr-p  it  so  united,  con- 
tinually. Any  gain,  even  the  smallest,  is  better  than  no 
gain  at  all. 

From  what  has  been  said,  it   is  evident   that  the  pro- 


36  OF    FIXED    AISD    CIRCULATING    CAPITAL. 

cess  of  accumulation,  in  all  branches  of  production,  is 
fhe  same.  It  will  also  appear,  that  where  capital  is  free, 
that  is,  where  there  are  no  restrictions  upon  the  use  of 
It,  there  can  be  no  great  permanent  difference  in  the 
rate  of  accumulation,  between  the  different  modes  in 
which  it  is  employed.  If  the  profits  of  one  kind  of 
business  are  above  the»  average  rate,  other  capital  will 
flow  into  that  channel.  If  the  profit  in  any  branch  of 
production  be  below  the  ordinary  rate,  capital  will  be 
withdrawn  from  it.  If  commerce  be  unusually  lucrative, 
men  w-ill  leave  other  pursuits,  and  devote  themselves  to 
commerce,  until,  by  competition,  they  reduce  the  profits 
to  the  ordinary  rate.  If  commerce  be  depressed,  men 
will  leave  it,  until,  by  the  reduction  of  the  supply  of 
commercial  facilities,  the  rate  of  profit  is  increased. 
Rates  of  profit  cannot  be  rendered  permanently  unequal 
in  any  other  manner,  than  by  oppressive  legislation. 
The  differences  in  profit,  in  the  various  departments  of 
industry,  are,  therefore,  more  apparent  than  real.  When 
profit  is  sure,  it  is  of  course  less  than  when  it  is  uncer- 
tain. But,  how  much  soever  individual  cases  may  differ, 
it  will  be  found  that  the  average  is,  for  long  periods,  very 
nearly  equal. 

Sixth.  Of  Fixed  and  Circulating  Capital.  The 
capital  from  which  the  owner  derives  profit  only  by 
exchanging  its  form  or  place,  is  circulating  capital. 
Thus,  the  wares  of  the  merchant,  the  products  of  the 
manufacturer,  the  harvest  of  the  fiirmer,  are  circu- 
lating capital.  On  the  otlier  hand,  the  instruments 
which  each  of  these  producers  uses,  in  performing  hia 
various  operations,  are  fixed  capital.  Such  are  the 
ships  and  warehouses  of  the  one,  the  machines  and 
buildings  of  the  other,  and  the  tools  and  land  of  the 
third. 

Circulating  capital  is,  in  general,  that  which  is  already 
prepared  for  the  gratification  of  human  desire,  or  that 
which  is  in  a  course  of  preparation  for  this  state.  Fixed 
capital,  in  general,  consists  of  the  instruments,  or  fix- 
lures,  which,  in  some  form  or  other,  assist  us  in  accom- 
plishing this   result.      Tools,  machinery,  houses,   ships, 


OF     FIXF.D    AND    CIRCULATING    CAPITAL  37 

roads,  canals,  and  improvemenls  on  farms,  &c.,  aro 
fixed  capital.  Circulating  capital  is  in  general  rapidly 
consumed.  It  is  commonly  an  annual  product,  and  sub- 
ject to  an  annual  consumption.  Fixed  capital  is  not  an 
annual  product,  and  may  last  for  a  year,  a  lifetime,  or 
indefinitely.  It  is,  however,  still  liable  to  gradual  decay, 
which  decay  must  be  replaced,  or  else  the  possessor 
would  find  himself  growing  poorer,  inasmuch  as  these 
tools  and  machinery  are  the  means  by  which  his  labor 
is  rendered  productive. 

The  amount  of  fixed  capital  employed  in  somo 
branches  of  industry,  is  much  greater  than  that  in  others. 
Some  mechanical  trades  retjuire  no  more  fixed  capital 
than  a  cheap  set  of  tools.  Others,  as  large  manufacturing 
establishments,  require  a  large  fixed  investment.  In  pro- 
portion to  the  amount  which  must  be  thus  employed,  will 
be  the  amount  of  accumulated  property  necessary  to  be 
possessed  by  him  who  wishes  to  employ  himself  in  that 
particular  department  of  industry.  Sometimes,  by  far 
the  greater  part  of  the  investment  is  fixed  capital,  and  it 
is  also  very  great  in  amount.  In  this  CJfee,  it  is  fre- 
quently apportioned  among  individuals,  who  each  sub- 
scribe and  pay  a  part  of  the  cost.  Such  is  the  case 
with  railroads,  canals,  and  works  of  public  improvement 
generally. 

There  is  an  obvious  tendency  in  the  nature  of  things, 
to  convert  circulating,  into  fixed  capital.  As  circulating 
capital  is  annually  consumed,  it  must  be  annually  re-  - 
placed,  or  mankind,  after  the  first  year,  would  all  perish  ~ 
It  is  replaced  by  the  annual  productions  of  the  earth, 
either  vegetable,  animal,  or  mineral.  But,  if  the  indus- 
try of  man  has  been  successfully  exerted,  the  amount  of 
annual  production  will  be  sufficient,  not  only  to  supply 
the  ordinary  wants  of  the  producers,  and  to  repair  the 
waste  afnd  wear  of  fixed  capital,  but  also  to  leave  a  sur- 
])lus  unappropriated.  Now,  as  this  kind  of  capital  is 
annual,  and  as  it  is  also  perishable,  if  it  be  not  used  in 
some  way,  this  surplus  must  be  a  total  loss.  If  it  be 
appropriated  to  the  multiplication  of  annual  capital,  it 
will  only  increase  tliat  surplus,  which  is  already  too 
4 


14 


:j 


38  OP    FIXED    AND    CIRCULATING    CAPITAL. 

great.  Hence,  it  can  be  usefuny  employed  only  in  the 
creation  of  fixed  capital.  To  accomplish  this  result,  it 
is  offered  in  the  form  of  wages,  to  mechanics,  artisans, 
and  those  persons  who  employ  themselves  in  the  maiiu 
facture  of  those  articles,  in  which  fixed  capital  consists. 
Hence,  the  wages  of  this  class  of  persons  will  rise,  and 
a  portion  of  them  will  be  drawn  from  the  production  of 
cii'culating  capital.  This  might  at  first  be  supposed  to 
diminish  the  amount  of  circulating  capital.  Such  would 
be  the  result,  were  it  not  for  the  fact,  that  the  very  ob- 
ject of  fixed  capital,  is  to  enable  us  to  create  circulating 
capital,  with  a  less  amount  of  labor.  A  society,  in 
which  a  part  of  the  members  are  devoted  to  the  making 
of  useful  machines,  will  create  a  gieater  amount  of  an- 
nual products,  than  one  in  which  all  are  devoted  exclu- 
sively to  the  creation  of  annual  products.  Thus,  in  a 
short  time,  the  annual  surplus  is  greater  than  before,  and 
a  greater  number  of  persons  is  employed  in  creating 
fixed  capital,  and  that  kind  of  fixed  capital,  which  in- 
volves, in  its  creation,  a  greater  amount  of  expense. 
It  is  thus  that  a  society,  age  after  age,  grows  rich,  and 
each  successive  race  of  men  leaves  the  world  better 
provided  with  the  means  of  production,  than  it  found  it. 
This  may  all  be  illustrated,  by  a  few  very  familiar  in- 
stances. A  savage,  who  obtains  peltry  by  his  bow  and 
arrows,  having  provided  for  the  food  and  clothing  of  his 
family,  will,  if  he  be  industi'ious,  possess  a  surplus  which 
must  now  be  useless  to  him.  He  would  naturally  ex- 
change his  surjilus  for  a  rifle  ;  a  kind  of  fixed  capital, 
by  means  of  which,  his  circulating  capital  would  be 
greatly  increased.  This  increase  of  capital  would  en- 
able him,  besides  procuring  better  clothes  and  more  nu- 
merous conveniences,  to  add  to  his  fixed  capital  by  pur» 
chasing  a  horse,  or  a  plough,  or  by  erecting  a  house. 
These,  in  their  turn,  would  augment  his  circulating  capi- 
tal ;  and  thus,  with  every  year,  his  fixed  and  circulating 
capital  would  steadily  increase.  Hence,  very  soon, 
there  would  arise  a  demand  for  the  services  of  men  who 
employed  themselves  in  creating  fixed,  instead  of  circu- 
lating capital.     That  is,  mechanical  arts  would  be  prac- 


OF    FIXED    AND    CIRCULATING    CAPITAL.  39 

tised  ;  and  llie  artisans  would  be,  as  we  find  that  in  such 
a  state  of  society  they  always  are,  exorbitantly  paid  for 
their  labor. 

Again  :  Suppose  a  farmer  to  enter  upon  new  and  un- 
tilled  land.  His  first  care  is  to  produce  the  necessities 
of  life,  for  himself  and  his  family.  When  this  is  ac- 
complished, he  a|)propriates  a  part  of  his  labor  to  the 
creation  of  fixed,  instead  of  annual  capital  :  that  is,  he 
erects  fencv^s,  purchases  with  his  produce  carts  and  ani- 
mal, builds  barns  and  outhouses,  and  thus  renders  his 
farm  a  much  more  productive  instrument  than  before. 
With  his  incrcasint^  surplus  he  purchases  additional  land, 
if  he  needs  it,  and  brings  it  all  into  such  a  state  of  culti- 
vation as  he  thinks  desirable.  By  all  these  means,  his 
annual  surplus  is  rendered  greater,  and  he  is  enabled  to 
extend  the  amount  of  his  fixed  capital,  by  building  a 
better  house,  purchasing  better  ploughs,  harrows,  carts, 
and  various  machines  by  which  his  future  labor  will  be 
rendered  more  productive.  But  we  see  that  this  could 
'not  be  done  by  the  farmers  of  a  neighborhood,  unless 
some  portion  of  them  abandoned  farming,  and  devoted 
themselves  to  the  creation  of  fixed  capital.  There 
would,  therefore,  arise  a  great  demand  for  mechanical 
labor.  And  as  there  would  hence  arise  the  necessity 
for  a  great  number  of  exchanges,  some  portion  of  the 
society  must  devote  themselves  to  effecting  them  ;  that 
is,  must  become  merchants.  In  this  manner,  ciiculating 
capital  first  gives  rise  to  fixed  c;ipilal,  and  fixed  capital 
increases  again  the  amount  of  circulating  capital  ;  and 
thus  they  go  on,  year  after  year,  mutually  augmenting 
each  other. 

Thus  also  the  mercliant,  whose  business  it  is  to  aug 
ment  the  exchangeable  value  of  a  given  amount  of  cir 
culatmg   capital    by   transportation  and   exchange,   pro 
duces,  by  his   operations,  an  annual  surplus.      This  he 
adds  to  his   former  ca])ital,  for  a  while,  but  sof/n    pur- 
chases fixed  capital,  such  as  ships,  &c.,  to  facilitate  his 
operations.     When  he  has  enough  of  these,  and  as  large 
an  amount  of  circulating  capital  as  he  wishes  to  em))loy, 
he  then  begins  to  invest  his  surplus  either  in  some  pei- 


40  OF    FIXED    AND    CIRCULATING    CAPITAL. 

manenl  works  of  public  improveinent,  as  bridges,  roads, 
canals,  or  in  something,  which,  besides  Hicilitating  the 
productiveness  of  the  society,  will  also  yield  him  a  rev- 
enue, or  else  he  employs  it  in  manufactures,  according 
to  the  condition  of  the  country,  and  its  natural  demands 
and  facilities. 

From  what  has  been  remarked  above,  we  may  easily 
see  the  natural  course  which  a  nation  takes,  in  the  pro- 
gressive accumulation  of  wealth.  Its  first  productions 
are,  circulating,  or  annual  capital  ;.  the  products  of  the 
field,  of  the  forest,  or  of  the  ocean.  Next  follow  im- 
provement in  permanent  conveniences,  and  the  construc- 
tion of  instruments  for  agricultural  production  ;  then  the 
exchange  of  its  own  products  for  other  circulating  capi- 
tal, or  for  the  annual  necessaries  of  life  ;  and  then  the 
exchange  for  fixed  capital  of  the  most  necessary  kind. 
Thus,  the  Dutch,  on  their  first  settlement  in  this  coun- 
try, used  to  import  their  bricks  from  Holland.  Com- 
merce being  thus  commenced  with  an  older  country,  the 
colonists  soon  engage  in  it  themselves,  and  invest  a  large 
portion  of  their  annual  surplus  in  ships.  Before  manu- 
factures had  commenced  in  this  country,  previously  to 
the  Revolution,  the  commerce  of  the  colonies  had  be- 
come already  extensive.  All  these  changes  prepare  the 
way  for  the  investment  of  capital  in  manufactures,  which, 
in  their  proper  and  natural  time,  must  be  established  ; 
and  when  that  time  arrives,  they  n-ill  be  established, 
without  the  aid  of  legislative  enactment,  and  according 
to  the  very  laws  by  which  accumulation  is  governed. 

From  what  has  been  remarked,  we  also  see  that  the 
advantages  which  we  enjoy  over  savage  nations  result, 
principally,  from  the  possession  of  a  greater  amount  of 
fixed  capital  ;  or,  in  other  words,  the  permanent  results 
of  pre-exerted  industry.  That  advantage  consists  in 
this,  that  this  ca])ital,  besides  affording  to  its  owners  the 
ordinary  rate  of  profit,  enables  men  to  produce  at  a 
much  cheaper  rate ;  that  is,  at  a  less  expense  of  labor. 
Thus,  a  cotton  factory,  besides  affording  a  fair  profit  to 
the  owner,  enables  him  to  do,  by  one  hour's  labor,  what 
would  otherwise  require  the  labor  of  days  or  of  wcieks 


OF    MONLY.  41 

liy  all  this  difference,  iberefore,  wc  have  the  advantage 
over  savages,  or  over  those  who  went  before  us.  Hence, 
a  nation,  which  doei  not  possess  the  results  of  pre- 
exerted  industry,  must  be  j)oor,  unless  its  natural  ad- 
vantages enable  it  to  avail  itself  of  those  of  other 
countries.* 

Hence,  we  also  see  the  reason  why  the  traffic  between 
savage  and  civilized  nations  is  so  greatly  in  favor  of  tho 
jjtter.  The  latter  are  enabled  to  offer  in  barter  that 
which  is  of  inestimable  value  to  the  savage,  but  which 
the  ch  ilized  man  can  produce  with  a  very  small  portion 
of  labor.  An  axe  would  cost  a  savage  the  labor  of 
weeks  or  of  months,  while  a  smith  in  New  England 
would  make  it  in  a  few  hours.  Hence,  it  is  not  wonder- 
ful that  the  one  should  be  willhig  to  give  for  it  vastly 
moie  than  it  costs  the  other.  And,  on  the  other  hand, 
the  commodities  of  the  savage  are  of  very  little  value  to 
him,  but  of  high  value  to  the  mechanic  or  artisan. 
Hence,  the  gain  to  him  also  is  great.  An  Indian  who 
exchanges  peltry,  which  is  worth  in  New  York  fifty  or 
one  hundred  dollars,  for  a  rifle,  powder,  and  bullets,  has 
improved  his  condition,  by  means  of  the  purchase, 
really  more  than  the  gunsmith,  who  has  made  so  exor- 
bitant a  profit. 

Seventh.  Of  Money.  It  will  be  observed  that, 
thus  far,  I  have  not  mentioned  money  as  an  item  of  cap- 
ital. Although  this  is  not  the  place  in  which  to  treat  of 
the  functions  of  money,  yet  it  may  be  proper  here  to 
add  a  single  remark  concerning  it. 

Money  forms  but  a  very  small  part  of  the  capital  of 
any  country.  J'ivery  one  may  easily  judge  of  this,  from 
his  own  observation.  How  very  small  a  portion  of  any 
one's  j)Ossessions  is  in  money.  And  if  this  be  true  of 
ever}'  individual  separately,  it  must  be  true  of  all  the  m- 
dividnals  collectively. 

*  Or,  in  othor  w-  rds,  as  it  is  well  expressed  by  Mr.  Cnrey.  in  hi3 
iat?  work  on  this  subject;  the  giia'itij  as  well  as  the  quontity  of  labor, 
enters  into  tlic  account,  whenever  we  speak  of  the  exclianijeable 
value  of  the  products  which  it  has  created.  The  quaVdij  of  labor  is 
always  in  priportipn  to  the  amount  of  pre-exerted  industry  with 
vvliicl)  it  u|>erutes. 

4* 


42  OF    MONET. 

The  sole  use  of  money,  is  to  facilitate  exchanges. 
It  is  an  instrument  for  the  saving  of  labor,  and  for  the 
performing  of  labor  with  greater  accuracy.  Of  this, 
any  one  may  convince  himself  in  a  moment,  if  he  will 
imagine  two  cases,  in  the  one  of  which  he  was  obliged 
to  make  several  exchanges  without  money,  and  the 
otlier  in  which  he  could  make  them  with  it. 

Money  gains  nothing  by  exchange,  but  rather  loses  in 
value,  like  every  other  machinery  which  is  worn  out 
while  it  accomplishes  its  object.  Hence,  it  belongs  to 
the  class  of  fixed  capital.  It  is  subject  to  slow  wear, 
which  must  be  replaced  out  of  the  circulating  capital  of 
the  country. 

And,  hence,  as  any  country  may  have  a  greater 
amount  of  any  particular  kind  of  fixed  capital  than  it 
needs,  as,  for  instance,  of  any  particular  kind  of  ma- 
chinery ;  and  as,  when  this  is  the  case,  it  sends  it 
abroad,  or  in  other  words,  makes  it  an  article  of  export, 
or  changes  it  into  circulating  capital,  so  is  it  with  money. 
If  a  country  has  more  money  than  is  sufficient  to  ac- 
complish its  exchanges,  it  sends  it  abroad,  and  receives 
back  something  that  it  needs  more.  Such  is,  perma- 
nently, the  case  in  mining  countries  ;  and  such  is,  at 
times,  the  condition  of  almost  every  commercial  nation. 


CHAPTER  SECOND. 

OF    INDUSTRY. 

Having,  in  the  previous  chapter,  explained  the  nature 
nnl  changss  of  Capital^  we  now  proceed  to  treat  of 
Industry.  In  doing  this,  we  shall  consider  :  1st.  The 
diilerent  objects  of  Human  Industry  ;  2d.  The  forms 
of  Human  Industry ;  and,  3d.  The  modes  by  which 
the  productive  power  of  Human  Industry  may  be  in- 
creased. 

PART   I. 

THE  OBJECTS  AND  FORMS  OF  HUMAN  INDUSTRY. 


SECTION  I. 

THE    DIFFERENT    OBJECTS    OF    HUMAN    INDUSTRY. 

It  has  been  seen,  in  the  previous  chapter,  that  the  in- 
crease of  capital  ;  that  is,  the  means  of  physical  happi- 
ness to  man,  can  be  effected  only  by  producing  change, 
of  some  kind,  in  ca])ital.  But  it  is  evident  that  this 
change  cannot  be  produced  without  labor,  since  no  valu- 
able change  is  spontaneous.  Hence,  the  great  object 
of  human  industry  is,  to  produce  some  valuable  change 
ill  capital. 

Now,  the  changes,  which  may  be  produced  in  the 
substances  of  nature,  may  all  be  reduced  to  three  ; 
change  in  the  elementar}/  form.,  change  in  the  aggregate 
Jorm.,  and  change  in  place.  To  efl'cct  one  or  the  other 
of  these,  all  valuable  human  labor  is  directed. 

1.  INIan  may  change  the  elementary  form  of  matter. 
The  farmer,  by  means  of  seed,  manure,  and  cultivation, 


44  THE     OBJECTS    OF    HUMAN    INDUSTRY. 

aided  by  the  agencies  of  the  sun  and  the  earth,  of  rain, 
and  the  atmosi)hei-e,  transforms  the  elementary  forms  of 
carbon,  gases,  and  water,  into  wheat.  The  chemist 
changes  the  elementary  forms  of  acids  and  alkalies  into 
oalts.  The  dyer  changes  the  elementary  forms  of  iron 
and  tannin  into  coloring  matter  ;  and  the  case  is  the 
same  with  the  various  other  forms  of  human  occupa- 
tion. 

2.  Man  may  change  the  aggregate  form  of  matter. 
The  cabinet-maker  changes  the  form  of  a  board  into 
that  of  a  desk  or  a  table  ;  the  smith,  a  piece  of  iron 
into  a  horse-shoe  or  a  nail  ;  the  mason  changes  a  pile  of 
bricks  and  mortar  nito  a  wall  ;  the  cotton  spinner,  a  bale 
of  cotton  into  thread  ;  the  weaver,  this  thread  into  cloth. 
And,  in  general,  the  labor  of  mechanics  and  manufac- 
turers is  employea  in  eiTecting  changes  in  the  aggregate 
forms  of  matter. 

3.  Man  may  change  the  place  of  matter.  Thus, 
the  shipmaster  transports  a  cargo  of  cotton  from  New 
York  to  Liverpool,  and  brings  back  a  cargo  of  cotton 
goods,  of  crockery,  or  of  hardware.  The  teamster  re- 
ceives a  wagon  load  of  merchandise  in  one  town,  and 
transports  it  to  another.  The  owner  of  a  canal  boat 
receives  manufactured  goods  in  Albany,  transports  them 
to  Buffalo,  and  brings  back  to  Albany,  in  return,  a 
freight  of  agricultural  produce.  The  agent  of  a  railroad 
receives  a  hundred  boxes  of  merchandise  in  IManchestei, 
and  transports  them  to  Liverpool.  And  thus,  also,  a 
large  number  of  the  inhabitants  of  every  populous  town 
derive  their  subsistence,  and  frequently  grow  rich,  sim- 
ply by  transporting  wares  and  merchandise  from  one 
part  of  the  town  to  another. 

'I'he.'.e  divisions,  in  general,  corrcsi)ond  with  the  agii- 
cultural,  mechanical,  and  commercial  departments  of  hu- 
man industry.  I  have  adopted  a  different  terminology, 
because  it  seenis  to  me  to  form  a  more  generic,  and  bet- 
ter limited  division,  and  one  more  conformable  to  the 
facts  in  the  case*. 

1.  Concerning  these  divisions,  it  is  jiroper  to  remark, 
tlitt,  though  these  are  the  varioi  s  objects  of  human  in- 


THE    OBJECTS    OF    HUMAN    INDUSTRY.  45 

dustry.  }et  it  frequently  happens  that,  he  ^vho  labors  in 
one,  is  also  obliged  to  labor  in  one  or  both  of  the  others 
Thus,  the  farmer  who  raises  a  crop,  is  obliged  to  trans- 
port  the  seed  to  the  field,  and  frequently  to  transport  his 
harvest  to  market.  'i"he  cabinet-iiiakcr  who  manxijac- 
lurcs  a  table,  may  transport  his  materials  from  the  lumber 
yard.  The  ejigineer,  on  the  railroad,  is  obliged  to 
change  the  elementary  form  of  wood,  in  order  to  produce 
the  caloric,  necessary  to  move  his  locomotive.  We 
designate  the  class  of  laborers  to  which  a  man  belongs, 
by  the  ultimate  object  which  he  has  in  view,  in  exercis- 
ing his  profession. 

2.  Each  one  of  these  forms  of  industry  is  equally 
rmportant  in  conferring  intrinsic  value  upon  substances  ; 
that  is,  in  giving  them  capacity  to  gratify  human  desire. 
Thus  we  see  that  the  ore  in  the  mine  has  no  power  to 
gratify  desire,  until  it  is  made  into  iron  or  steel.  The 
steel  is  valueless  for  the  purpose  of  cutting,  until  it  is 
transformed  into  a  knife,  an  axe,  or  some  cutting  instru- 
ment ;  and,  if  I  want  to  make  a  pen  in  New  York,  a 
knife  is  utterly  valueless  to  me  for  this  purpose,  while  it 
remains  in  Sheffield  or  Liverpool.  Unless  these  several 
values  are  all  conferred  upon  it,  it  would  be  of  no  ser- 
vice to  me.  Hence,  in  purchasing  a  knife,  I  pay  for 
them  all,  and  as  willingly  for  one  as  the  other. 

3.  Hence  we  see  how  incorrect  is  the  notion  some- 
times advanced,  that  all  wealth  is  the  production  of  one 
or  of  two,  and  not  of  all  these  forms  of  human  industry. 
All  these  changes  must  be  ellected  in  almost  every  arti- 
cle which  we  consume,  and  if  either  of  them  were  to  bo 
suspended,  our  desires  would  not  be  gratified,  and  the 
other  two  must  also  be  discontinued.  He  who  trans- 
ports flour,  performs  an  act  of  as  essential  importance 
to  the  sustentation  of  the  human  race,  as  he  who  raises 
wheat.  He  who  brings  a  knife  from  Liverpool  to  me, 
performs  a  labor  as  important  to  me,  as  he  who  manu- 
factures the  knife  ;  for,  if  it  were  three  thousand  miles 
off,  it  might,  for  all  the  })urposes  for  which  I  want  it,  as 
well  not  be  m  existence.  And  yet  more,  if  one  of  these 
forms  of  labor  should  cease,  the  others  must  soon  cease 


46  THE    OBJECTS    OF    HUMAN    INDUSTRY. 

with  it.  Of  what  vahie  would  wheat  or  wool  be  to  the 
farmer,  if  they  could  not  be  transported  from  liis  farm  ? 
And  again  :  what  gain  could  be  derived  from  either, 
vf  there  were  no  means  of  grinding  the  one,  or  of  manu- 
facturing the  other  ?  Hence  we  see  thai  all  the  forms 
of  industry  mutually  support,  and  are  supported  by,  each 
other ;  and  hence,  also,  we  see  that  any  jealousy  be- 
tween different  classes  of  producers,  or  any  desire  on 
the  one  part,  to  obtain  special  advantages  over  the  other, 
are  unwise,  and,  in  the  end,  self-destructive.  The  fact 
is,  that  if  left  to  themselves,  they  all  flourish,  and  they 
all  suffer  together.  Nor  can  either  one  be  depressed, 
for  any  considerable  period,  without  injuriously  affecting 
both  the  others. 

These  various  forms  of  human  industry  enter,  in 
different  degrees,  into  the  value  of  different  articles  of 
use.  For  instance,  butchers'  meat  and  green  vegetables 
derive  almost  their  whole  value  from  the  first  kind  of 
labor,  as  they  require  very  little  modification,  and  will 
bear  but  short  transportation.  On  the  contrary,  salted 
provisions  may  derive  a  large  portion  of  their  value  from 
change  of  place.  Clothing,  cutlery,  and  what  are  com- 
monly denominated  manufactures,  derive  the  greater 
portion  of  their  value  from  change  in  the  aggregate 
form.  The  original  material  constitutes,  in  general,  but 
a  small  part  of  their  price,  and,  not  being  of  great  bulk, 
their  transportation  is  not  very  expensive.  The  steel 
that  would  make  a  pair  of  razors,  and  the  cost  of  trans- 
porting them  from  Sheffield  or  Paris  to  New  York, 
would  form  but  a  very  small  portion  of  their  jirice. 
On  the  contrary,  bulky  articles,  such  as  coal  and  iron, 
derive  a  very  large  portion  of  their  cost  from  transpor- 
tation. Coal,  that  has  scarcely  any  exchangeable  value 
In  the  coal  mines  of  Pennsylvania,  is  sold  for  eight  or 
ten  dollars  a  ton  in  Providence.  And  all  the  labor  em- 
ployed upon  it,  is  that  which  is  necessary  for  breaking  i( 
in  pieces,  and  removing  it  from  its  bed  to  the  house  of 
the  consumer. 

As,  however,  the  human  race  is  scattered  over  the 
face  of  the  globe,  and  as  their  wants  in  all  latitudes  are 


THE    OBJECTS    OF    HUIMAN    INDU:«IRY.  47 

SO  nearly  ihe  same,  while  no  country  aflbrds  facilliies 
for  supplying  more  than  a  very  small  number  of  these 
wants,  it  is  evident  that  the  labor  employed  in  change  of 
place  must,  in  civilized  countries,  be  most  universal,  and 
must  enter  essentially  into  the  greatest  number  if  com- 
modities. Of  this  every  one  will  be  convinced,  who 
will  take  any  article  of  dress,  of  furniture  or  of  food, 
and  consider  the  amount  of  transportation  that  has  en- 
tered into  its  production  ;  and,  specially,  if  he  take  into 
account  the  transportation  which  has  entered  into  the 
formation  of  the  instruments,  by  which  it  had  been  pro- 
duced. The  same  truth  is  also  illustrated  by  the  fact, 
that  whole  nations,  with  very  small  natural  advantages, 
as  Holland  and  Venice,  have,  in  a  short  period,  become 
immensely  rich,  merely  by  conferring  change  of  place 
on  the  merchandise  and  productions  used  by  other  na- 
tions. Water  communication,  in  the  early  stages  of  so- 
ciety, greatly  diminishes  the  cost  of  transportation,  and, 
of  course,  increases  the  facilities  of  exchange.  It  is  on 
this  account  that  the  first  settlements  of  nations  are  al- 
ways either  on  the  shores  of  the  ocean,  or  along  the 
banks  of  navigable  rivers. 

.  It  may  also  be  worthy  of  remark,  that,  thus  far,  in 
the  progress  of  society,  the  ingenuity  of  man  has  been 
more  successful  in  devising  means  for  increasing  the  pro- 
ductiveness of  labor  in  the  second  and  third,  than  in  the 
first  kind  of  human  industry.  Improved  agricultural 
utensils,  a  better  knowledge  of  the  nature  of  soils,  and 
of  the  difierent  kinds  of  grain  and  edible  vegetables, 
and  of  manures  have  added  considerably  to  the  quantity 
of  product  that  can  be  raised  by  a  given  amount  of  la- 
bor. But  this  increase  bears  no  sort  of  proportion  to 
that  effected  by  the  use  of  the  machinery  in  the  case  of 
the  cotton  manufacturer,  and  by  the  use  of  the  locomo- 
tive and  many  other  forces.  It  is,  doubtle-s,  wisely 
ordered  that  it  should  be  so.  Agricultural  labor  is  the 
most  healthy  employment,  and  is  attended  by  the  fewest 
temptations.  It  has,  therefore,  seemed  to  be  the  will 
of  the  Creator  that  a  large  portion  of  the  human  race 
BfiQuld    always    be    thus    employed,   and  that,  whatever 


48  THE    OBJECTS    OF    HUMAN    INDUSTRY. 

effects  may  result  from  social  improvement,  the  propor- 
tion of  men  required  for  tilling  the  earth  should  never  bo 
essentially  diminished.  It  is  also  to  be  remarked,  thai 
division  of  labor,  which  so  greatly  increases  the  produc- 
tiveness of  human  industry  in  the  other  modes  of  pro 
duction,  can  be  applied  but  in  a  small  degree  to  agri- 
culture. No  man  can  devote  himself  exclusively  to 
ploughing,  sowing,  or  reaping  ;  because  only  a  small 
part  of  the  year  can  be  employed  in  either  of  these  0(?  • 
cu})ations.  The  farmer  must,  therefore,  practise  them 
all,  at  different  times  ;  and,  of  course,  every  farmer 
must  be  able  to  perform  not  one,  but  all  the  several 
operations  required  in  his  trade.  This  forms  another 
reason  why  the  increase  of  productiveness  of  human 
industry,  in  this  department  of  labor,  has  not  kept  pace 
with  that  which  has  been  witnessed  in  manufactures  and 
commerce. 


SECTION   II. 

THE    DIFFERENT    FORMS    OF    HUMAN    INDUSTRY. 

Industry  is  any  form  of  human  exertion  employed  in 
the  creation  of  value.  This,  of  course,  includes  exer- 
tion, both  of  body  and  of  mind. 

The  object  of  industry,  as  we  have  seen,  is  to  pro- 
duce change  of  some  sort  ;  since  change  is  necessary, 
either  to  the  creation  or  to  the  increase  of  intrinsic 
vahie,  and  is  ahvays  necessary  to  the  existence  of  ex- 
changeable vakie. 

We  have  also  seen  that  all  the  changes  which  human 
industry  can  effect  in  matter,  may  be  reduced  to  three, 
namely  :  Change  in  elementary  form  ;  change  in  aggre- 
gate form  ;  and  change  in  place. 

But  when  man  jiuts  forth  exertion  to  eflect  change,  it 
is  not  any  change  at  random,  but  some  specific  change 
wiiich  he  has  directly  in  view.  Were  it  otherwise,  his 
labor  would   be  worse  llinn  useless,  and,  like  tlie  cfibit 


THK     FOK.MS     OF    HUMAN    liNDUSTRF.  49 

of  a  maniac  or  an  idiot,  would,  in  nine  times  out  of  ten, 
destroy,  instead  of  creating  value. 

It  is  also  evident,  that  the  changes  which  can  be  ef- 
fected in  matter,  are  not  produced  at  random,  but  in 
obedience  to  certain  laics.  H  we  wish  to  kindle  a  fire, 
it  is  not  any  kind  of  effort  that  will  do  it,  but  effort  ex- 
erted in  obedience  to  the  laws  of  combustion.  If  we 
wish  to  raise  wheat,  it  is  not  every  kind  of  labor  that 
uill  do  it,  but  labor  exerted  in  obedience  to  the  laws  of 
vegetation.  And  so,  in  general,  if  we  wish  to  effect 
either  of  the  three  kinds  of  change  mentioned  above,  we 
must  act  in  obedience  to  those  laws  of  the  Creator,  to 
which  this  kind  of  change  has  been  subjected. 

Again  :  Supposing  the  laws  of  nature,  in  respect  to 
a  particular  change  to  be  known,  it  is  also  necessary  to 
know,  the  manner  in  which  they  may  most  successfully 
be  applied  to  the  accomplishment  of  a  particular  result. 
The  laws  of  combustion  and  of  gravitation  may  be  known, 
and  yet  a  very  important  effort  of  human  ingenuity  may 
be  required,  before  we  ascertain  the  best  method  of  so 
applying  them  as  to  be  able  to  construct  a  good  fire 
place.  The  expansive  power  of  steam  was  known  long 
before  a  steam  engine  was  invented  ;  and  still  longer  be- 
fore any  application  of  it  was  devised  by  which  it  might 
De  used  for  propelling  vessels  through  the  water.  And 
still  fiirther,  a  man  may  understand  the  general  laws  of 
physiology,  and  yet  be  unable  to  apply  them  to  the  cure 
of  diseases.  A  man  may  understand  the  general  prin- 
ciples of  jurisprudence,  and  yet  not  know  how  to  avail 
himself  of  them,  in  such  a  manner  as  to  procure  eith(;r 
defence  from  injury,  or  redress  of  grievance. 

But  suppose  this  also  to  be  known  :  it  still  remains 
for  us  to  put  those  means  into  operation,  by  which,  in 
obedience  to  the  laws  of  nature,  a  given  result  may  be 
accomplished.  He  who  understands  the  laws  of  com- 
bustion and  gravitation,  and  the  mode  of  their  appiica 
tion,  may  now  set  himself  to  work,  according  to  these 
laws,  and  build  a  chimney.  He  who  understands  the 
laws  of  hydrostatics,  and  the  mode  of  their  application, 
may  now  set  himself  to  work  to  build  a  boat.  It  is,  howev- 
5 


50  THE    F0R3IS    OP    HUMAN    INDUSTRY. 

er,  true  that  there  would  still  be  required  a  certa  n  degree 
of  skill  and  dexterity,  before  he  could  perform  either  of 
these  operations  well  ;  although  he  now  could  perform 
them,  in  some  way  or  other.  This  skill  can  Pe  ac- 
quired only  by  practice  ;  and  the  power  of  acquiring  it 
is,  in  general,  very  universally  bestowed  upon  men. 

From  what  has  been  said,  it  is   evident  that  the  'n^ 
dustry  of  which  man  is  capable,  may  assume  three  dif- 
ferent forms,  namely  :    Industry  of  discovery  or  hivtiti 
gation  ;    Industry  of  application  or  invention ;  and   In- 
dustry of  operation. 

1.  Industry  of  Discovery  or  Investigation.  Under 
this  class  of  laborers,  are  to  be  comprehended  those 
who  discover  the  laws  of  nature,  and  those  who  make 
them  known  to  mankind,  after  they  have  been  discov- 
ered. Newton  labored  in  this  department,  when  he 
discovered  the  laws  of  gravitation,  optics,  and  of  the 
motions  of  the  heavenly  bodies  ;  Franklin,  when  he  dis- 
covered the  laws  of  electricity  ;  and  Sir  Humphrey 
Davy,  when  he  discovered  the  alkaline  bases,  and  the 
laws  of  their  combination.  The  labor  of  each  of  these 
men  was  also  of  the  same  kind,  when  they  made  known 
these  laws  to  the  public.  The  labor  of  those  who  are 
called  pkilosopJiers^  belongs  to  this  class. 

2.  Industry  of  Invention  or  Application.  It  is  very 
rarely  that  a  simple  law  can  be  of  any  use,  without  some 
adjustment  by  which  we  may  avail  ourselves  of  its  ad- 
vantages. Hence,  a  very  important  department  of  hu- 
man industry  is  that  which  teaches  us  how  to  make  the 
application  of  the  principle,  so  as  to  accomplish  a  par- 
ticular purpose.  Newton  performed  this  labor  when  he 
invented  the  telescope  ;  Hadley,  when,  by  means  of  the 
quadrant,  he  applied  the  laws  of  light  to  the  measure- 
ment of  angles  ;  Franklin,  when  he  invented  the  con- 
ductor, or  lightning  rod  ;  Sir  Humphrey  Davy,  when  he 
invented  the  safety  lamp  ;  and  Fulton,  when  he  invented 
that  modification  of  the  steam  engine,  by  which  vessels 
ma)  be  proi)el]ed  through  the  water. 

Under  this  class,  I  tliink,  may  also  be  comprehended 
professional  labor,  generally.      The  business  of  the  cler- 


TilE    FORMS    OF    HUMAN    INDUSTRY.  51 

gyman  is  to  teach  us  in  what  manner  we  may  avail  our- 
selves of  the  moral  laws  of  the  Creator.  The  lawyer 
teaches  us  how  to  avail  ourselves  of  the  laws  of  that 
civil  society^  of  which  we  are  the  members.  The  })hy- 
sician  teaches  us  how  to  obey  the  physiological  laws 
under  which  we  are  created,  so  that  we  may  be  relieved 
from  sickness,  or  preserved  in  health. 

3.  To  the  third  class  of  human  industry  belong  all 
those  who  put  forth  the  physical  effort  necessary,  in  or- 
der to  create  the  values  desired.  They  are  the  laborers 
who  ))ro(liice  those  changes,  either  in  elementary  form, 
m  aggregate  form,  or  in  place,  of  which  we  have  al- 
ready spoken,  and  they  compose  by  far  the  most  numei- 
ous  class  of  society. 

It  may  here  be  remarked,  that  two  of  these  forms  of 
labor  are  frequently  performed  by  the  same  person. 
For  instance,  he  who  discovers  a  law  sometimes  also 
teaches  us  how  to  aj)ply  it.  Thus,  as  we  have  already 
shown.  Sir  Isaac  Newton,  Franklin,  and  Sir  Humphrey 
Davy,  were  both  discoverers  and  inventors  ;  that  is,  they 
performed  both  the  first  and  second  kinds  of  industry. 
Thus,  the  second  and  the  third  are  also  frequently 
united  ;  that  is,  the  individual  who  labors  at  a  particular 
operation,  also  invents  some  machine  by  which  a  partic- 
ular process  in  that  operation  is  improved.  Thus,  Sir 
Richard  Arkuright,  a  mechanic,  invented  \\\^.  spinning 
machinery  now  in  common  use  ;  and,  in  general,  many 
of  our  most  important  inventions  have  been  made  by  op- 
erative laborers.  And  there  can  be  no  doubt  that,  if  a 
knowledge  of  the  laws  of  nature  were  more  generally 
diffused  throughout  this  class  of  society,  the  progress  of 
invention  would  be  inconceivably  more  rapid.  I  know 
of  nothing  which  would  tend  so  directly  to  the  general 
imj  rovement  of  the  useful  arts,  as  a  wide  diffusion  of 
the  knowledge  of  principles  among  those  whose  business 
it  is  to  employ  those  principles  in  their  daily  avocations. 

Although  I  have  arranged  the  several  forms  of  human 
Industry  in  the  above  order,  I  by  no  means  assert  that 
tiiis  is  the  order  in  which  they  actually  arise  among  men. 
The  reverse  is,  on  the  contrary,  far  more  commonly  the 


52     THE  PRODUCTS  OF  HUMAN  INDUPTRY. 

fact.  Men  commence  by  creating,  at  first,  the  simplest 
forms  of  value,  and  those  absolutely  necessary  to  their 
actual  existence.  Still,  in  order  to  create  these  values, 
with  certainty  and  with  regularity,  they  must  very  soon 
have  discovered,  by  experiment,  some  rules  by  which 
the  process  must  be  conducted.  IMen  would  very  soon 
discover  that  stones  would  not  ignite,  and  that  a  fire 
could  not  be  kindled  in  a  pool  of  water.  As  they  ad 
vanced,  by  successive  experiments,  they  invented  tools, 
by  which,  without  knowing  why,  they  found  themselves 
able  to  accomplish  their  purposes  with  less  labor  and 
with  greater  success.  Thus,  a  man  would  construct  a 
raft  to  transport  himself  and  his  property  over  a  river, 
before  he  knew  any  thing  of  the  laws  of  hydrostatics  ; 
and  he  would  employ  a  wedge,  before  he  understood 
the  doctrine  of  forces.  The  last  labor  required,  is  to 
ascertain  the  laws  by  which  these  changes  are  governed. 
As  soon  as  this  is  done,  a  great  improvement  is  at  once 
effected  in  all  the  former  inventions  ;  and  new  inven- 
tions arise,  which  otherwise  would  never  have  been  sug- 
gested. Thus,  a  knowledge  of  the  laws  of  combustion 
has  greatly  improved  the  construction  of  instruments  for 
warming  our  houses.  A  knowledge  of  the  laws  of  hy- 
drostatics has  greatly  improved  the  construction  of  ships. 
And  a  knowledge  of  the  laws  of  steam  has  given  birth 
to  all  the  machinery  connected  with  the  steam  engine. 
And,  it  seems  not  too  much  to  hope  for,  that  the  knowl- 
edge of  the  laws  of  nature  will  be  yet  so  univ.ersally  dif- 
fused, that  invention  shall  almost  cease  to  be  the  work 
of  accident  ;  but,  that,  when  an  instrument  is  wanted, 
men  will  proceed  to  discover  the  law,  and  invent  the 
application,  just  as  Sir  Humphrey  Davy  proceeded, 
when  he  was  requested  to  invent  the  safety  lamp. 

OP    THE    DIFFERENT    PRODUCTS   OF    THE    VARIOUS 
FORMS    OF    INDUSTRY. 

QV  The  pijpduct  of  operative  industry,  is  a  change_pf 
form  or  of  place  in  )iuillri\])y  which  its  intrinsic  ai)d 
exchangeable  value  is  iucuascd.      As  the  excrtioin^f 


THE    TRODUCTS    OF    HUMAN     INDUSTRY.  53 

this  labor  confers  its  value,  it  gives  to  the  laboicr  a  ri^lii 
either  tojlie  wliole,  or  to  uii  equitable  pan  ol"  (hi^  nuii- 
ifif^on  vvh|cli  ii   Is  o\erietl._   'i'i;;       '  '  ily  ;i:  i  <i- 

tained  and  eiiforcv d  ;  for  the  hili'.i    .    i  mi.'   it,  hy 

seizing  either  on  tlic  matter  itseil,  or  on  sucii  j)art  ol  it 
as  may  be  snfhcient  to  sa  isfy  his  demand. 

2.  The  cliaiiji;!',  which  is  thus  produced,  could  not  bo 
effected  by  a  less  amount  of  labor,  than  tiiat  which  the 
laborer  has  exerted  Jf  a  man  make  a  table  with  suit- 
able skill,  such  a  table  could  not  be  made  by  any  one 
else  with  a  less  degree  of  skill  and  a  smaller  amount  of 
labor  ;  and  hence,  the  cost  of  tables  must,  in  the  same 
place,  and  at  the  same  time,  be  very  much  the  same. 
Besides  this,  there  is  no  power  in  tables  to  multiply 
themselves.  Hence,  the  laborers  in  this  or  any  other 
de))artment,  have  a  sort  of  monopoly  of  this  kind  of 
]uoduction,  inasmuch  as  no  one  can  produce  it  cheaper, 
and  none  but  themselves  can  produce  it  as  cheap. 

But  all  this  is  reversed,  in  the  case  of  the  first  two 
kinds  of  labor.      For,    " 

1.  The  product  which  the  discoverer^or  inventor 
creates  is  iminateriat.  Tilslcnou'lnlge,  or  a  change  eT- 
fected  on  mind^  the  immaterial  pait  of  n)an.  By  ere- 
atnig  this  (Trail ge,  a  mail  does  not  acquire  a  right  to  the 
wliolcj  or  to  any  part  of  the  su/;.^iauce,_jn  which  the 
value  resides.  'J'he  substance  cannot  be  aj)proj)rIated, 
nor  can  it  be  divided  ;  and,  were  this  possible,  the  la* 
borer  could  make  no  use  of  it.  Nor  is  the  chango 
one  which  is  cognizable  by  the  senses  of  otliers,  but 
only  by  the  consciousness  of  the  person  in  whom  it 
is  wrought.  Hence,  this  iiiaiks  a  Ijioad  distinction  be- 
tween this  and  the  other  loiins  iA   hihor. 

2.  Although  the  discovcr\-  oi'  liic  laws  !iy  whi'  h  the 
jchanges  in  mattiM*  are  go\('nic(l,  iiia\'  roipiiiL'  ihc  exer- 
use  of  the  most  unusual  talent,  and  iiia\'  doniand  both 
protracted  and  most  expensive  labor  ;  yet  these  laws 
may  be  promulgated^  after  iliay.  are  .discovered,. by  men 
of  the  most  ordinary  talent.  If  a  man  discover  a  law 
and  reveal  it  to  his  neighbor,  that  is,  create  this  change 
m  his  mind,  his  neighbor  inav  create  the  same  product 

5* 


54      THE  PRODUCTS  OF  HUMAN  INDUSTRY. 

in  an  hour,  in  the  minds  of  a  thousand  persons,  and  each 
one  of  these  in  the  minds  of  a  thousand  more.  And 
specially,  by  means  of  the  press,  this  power  is  multi- 
plied indefinitely.  There  is  therefore  no  ratio  between 
the  labor  or  skill  necessary  to  create  it,  and  that  ne-- 
cessary  to  promulgate  it  after  it  has  been  discovered, 
^lencje^he  who  first  creates  knowledge,  has  no  means  of 
jnonopolizing  itj  nov  rajiihg  exchangeable  \  alue  bejKS- 
Jained,  b)  the  consideiation  ihaLiio  one  could  create  it, 
afterwards,  uith  less  laboj*.  Hence,  as  the  supply  of 
the  product  can  at  any  moment  oe  nTimitably  increased, 
it  very  soon  ceases  to  have  any  exchangeable  value. 

From  those  lea^ons  it  will  be  seen,  that  the  ordinary 
rules  of  supply  and  demand,  and  cost  and  labor,  do  ncj 
enter  into  view,  when  we  speak  of  intellectual  products. 
They  can  therefore  rarely  be  adjusted  by  any  fixed  rule. 
Nevertheless  as  immaterial  products  are  of  the  greatest 
importance  to  the  prosperity  of  a  country,  the  Political 
Economist  may  point  out  the  circumstances  most  favor- 
able to  their  production,  and  the  rule  by  which  those 
who  produce  tliem  should  be  remunerated.  The  above 
considerations  are  suggested,  in  order  to  explain,  why 
Political  Economy,  so  commonly,  treats  almost  exclu- 
sively of  material  products. 

It  may,  however,  be  remarked,  that  civil  society  ob- 
serving that  immaterial  products  are  necessary  to  the 
well  being  of  a  community,  and  that  those  who  create 
them,  are  liable  to  remain  altogether  unpaid  ;  has  fre- 
quently devised  means  by  which  some  remuneration  may 
be  reaped  from  the  exercise  of  this  kind  of  industry. 
Such  are  the  laws  of  copy,  and  of  patent  right.  By 
the  first  of  these,  an  autlmr  is  allowed,  for  a  limited 
time,  the  exclusive  control  over  the  publication  of  his 
work;  and  by  the  other,  thjp  inventor  is  entitled  to  the 
exclusive  control  over  the  use  of  his  invention.  In  this 
manner,  both  of  Uiese  classes  of  laborers  are  enabled  to 
derive  some  portion  of  beneimVom  tliclr  productionSr 
Were  it  otherwise,  all  their  reward  would  consist  in 
whatever  of  consideration  they  might  obtain  in  the  cooi- 
niunity,  and  in  the  gratification  of  benevolence  from  the 


THE    PRODUCTS     OF    HUMAN    INDUSTRY.  55 

consciousness  of  having  imi)roved  the  condition  of  iheir 
fellows.  But,  inasmuch  as  every  other  man,  who  is 
usefully  employed,  obtains  these  rewards  also,  and  re- 
ceives pecuniary  advantage  in  addition,  there  is  no  rea- 
son why  the  intellectual  laborer  should  receive  only  the 
first,  and  be  excluded  altogether  frouj  the  second. 

From  what  has  been  said,  another  diii'eience  between 
tVese  two  forms  of  product  may  be  seen.  The  product 
of  operative  labor,  being  united  with  matter,  and  being 
limited  in  quantity  and  fixed  in  cost,  may  be  exported 
to  auQther  country,  and  will  command  a  correspondent 
amount  of  exchangeable  value  in  the  products  of  that 
country.  Hence,  a  nation  may  i^row  rich,  either  by 
agriculture,  manufactures,  or  commerce.  But  this  is 
not  the  case  with  immaterial  products.  We  cannot  send 
abroad  a  given  amount  of  knowledge,  and  bring  back  a 
correspondent  amount  of  material  products.  The  small- 
est amount  of  knowledge,  is  capable  of  such  indefinite 
multiplication,  xhat  the  demand  may  be  instantly  supplied. 
Hence,  a  society  composed  solely  of  philosophers,  or 
mventors,  or  professioiuil  men,  would  never  grow  rich, 
&iit  niu=:t,  if  it  performed  no  otiiej-  labor,  of  necessity 
sta;\i'.  Laiiori'is  of  tlii^  cl;!--^  ;nlil  aTcnil)  to  t'.ie  value 
of  ii;!]  :i-  l.ili'U',  liiough  ilicir  proikict,  if  no  fMhr-r  were 
/■rrai^'-K  w.)iil(l  he  valueless  in  exchuni;;'.  'rhcy  may 
be  compared  to  the  steam  in  an  engine,  which,  when  it 
IS  combined  witli  proper  machinery,  produces  the  most 
^surprising  results,  but  whicli,  when  left  to  itself,  is  dissi- 
pntcd  into  air.  On  the  other  hand,  the  sepaiate  parts 
of  the  machinery,  though  they  might  be  of  some  use  as 
raw  material,  yet,  if  the  steam  were  withdrawn,  would, 
immediately,  become  a  mere  mass  of  cumbersome  and 
\alueless  lumber. 

Thus,  we  see  that  all  the  cliisses  of  laborers  are  mu- 
Jjiiallv  nncp-,^;>rv  to  (>'icli  oilier.  ^Viihont  ;i  IcnouTedge 
of  the  la'vvs  of  nature,  we  slionkl  all  !);■  <:!■■!  •■  W'lih- 
puttlie  skill   and  labor  of  J^ie   media::;  ..  onM 

neither  exist  tlie  opportunity  of  acrpiiiii:  -.ItMige, 
DOr . wp_uld  ourknowledgCj  if  acquired,  be  of  :iiiy  practi- 
gal  value.     Nothing  can,  therefore,  be  more  yiyeasQna« 


56  INCREASE    OF    PRODUCTIVENESS. 

ble  than  the  prejudic'es  wiiich  sometimes  exist  between 
the3e_dTi]erent  classes  of  lautirersj^and  nothing  can  be 
niore  beautiful,  than  their  harmonious  co-operation  in 
every  effort  to  increase  production,  and  thus  add  to  the 
conveniences  and  happiness  of  man. 


PART   II. 


THE   MODES    BY   WHICH    THE    PRODUCTIVENESS    OF 
HUMAN   INDUSTRY   MAY   BE   INCREASED. 

It  is  obvious,  that  if  the  capital  and  number  of  labor- 
ers be  at  any  one  period  the  same,  ihe  annual  amount  of 
product  created  will  be  as  the  amount  of  industry  ex- 
erted. Were  the  laborers  all  sickly,  so  tliat  they  could 
work  only  for  four  hours  a  day,  there  would  be  but  half 
as  large  a  product  created,  as  if  they  all  labored  for 
eight  hours  a  day.  .  If,  by  a  palsy,  they  were  all  de- 
prived of  the  use  of  one  of  their  arms,  a  correspondent 
decrease  of  production  must  ensue.  On  the  contrary, 
if,  while  the  cost  of  their  support  remained  the  same, 
their  ordinary  power  of  labor  could  be  doubled,  theie 
would  be  twice  the  usual  amount  of  value  created.  And 
hence,  in  general,  we  see  that,  other  things  being  equal, 
just  in  proportion  as  more  lahor  is  bestowed,  the  de- 
sires of  every  one  are  more  fully  gratified,  that  is,  he 
grows  richer  ;  and,  on  the  contrary,  as  labor  is  dimin- 
ished, the  laborer  suffers,  or  grows  poorer.  This  result 
every  one  witnesses  every  day.  Sick,  aged,  and  idle 
people  suffer,  because  they  either  do  not,  or  cannot,  be- 
stow the  labor  upon  capital  necessary  to  create  an 
amount  of  product  sufficient  for  their  subsistence. 

I^ut  the  physical  power  of  man  is  extremely  limited. 
There  is  an  average  amount  of  fatigue  which  a  human 
being  can  undergo^  which  can  rarely,  and  but  for  veiy 
short  periods,  be  exceeded.     If  he  be  worked  too  hard, 


INCREASE    OF    PRODI  CTIVENESS.  57 

ne  sickens  and  dies  ;  and  dies  probably  from  being  over- 
worked more  readily  and  more  commonly  than  any  oilier 
aninial.  When,  therefore,  the  whole  physical  power  of 
man  is  employed  upon  the  capital  which  ho  possesses, 
this  may  be  considered  the  nalural  limii  of  human  pro- 
ductiveness. 

1.  But  it  is  evident,  that  if  by  any  means  we  could 
inciease  this  power  ten-fold,  there  would  be  a  ten-fold 
increase  of  production.  U  we  could,  by  any  means, 
enable  a  man,  with  one  day's  labor,  to  execute  as  much 
change  in  ca})ital  as  he  could  before  execute  with  ten 
days'  labor,  there  would  be  just  ten  times  as  many 
changes  ellected  ;  that  is,  ten  Uines  as  much  value  creat- 
ed, and  ten  times  as  much  product  to  be  either  enjoyed 
b)'  himself,  or  to  be  exchanged  for  equivalent  means  of 
happiness.  And,  if  the  power  of  efl'ecting  changes  be 
increased  m  other  men  in  the  same  ratio,  the  product  of 
the  whole  society  will  be  increased  in  the  same  propoi'- 
tion.  This  is  one  of  the  effects  produced  by  the  use  of 
natural  agents  ;  and  hence,  it  is,  that,  just  in  proportion 
as  they  are  used,  the  condition  of  man  is  annually  and 
rapidly  improved. 

2.  But  this  is  not  all.  There  are  many  values  which 
are  necessary  to  the  happiness  and  even  to  the  existence 
of  man,  which  he  could  not  create  by  his  unassisted 
powers.  Thus,  he  needs  shelter,  cooked  food,  and 
clothing.  But  he  could  not,  with  his  teeth  and  nails, 
cut  down  a  tree  and  fashion  it  into  a  cabin.  He  cannot, 
by  his  hands,  either  cook  his  food,  or  manufacture  a  fab- 
ric suitable  for  clothing.  All  these  can,  however,  be 
done  by  other  agents  which  he  can  command  and  control. 
Thus,  iion  can  be  made  to  cut  down  and  fashion  a  tree, 
fire  to  cook  his  food,  and  a  spiiniing  wheel  and  loom  can 
be  made  to  furnish  him  with  clothing.  Thus  we  disco\er 
the  second  use  of  natural  agents.  They  enable  him  to 
create  values  necessary  to  his  existence,  wliich,  icilhout 
their  aid,  could  never  be  produced.  In  this  mannei,  an 
additional  power  for  the  creation  of  product  is  given  to 
liunicTn  industry. 

3.  But  this  is  not  all.     It  is  found  that  a  man,  hy  de- 


5S  MODES     BY    WHICH    THE     PRODUCTIVENESS 

voting  himself  to  one  particular  pursuit,  is  able  to  creato 
a  vastly  greater  amount  of  product  in  a  given  time,  than 
he  could  create  if  he  devoted  himself  to  several  pursuits. 
Hence,  if  there  are  ten  products  to  be  created,  by  ten 
men,  they  will  in  a  given  time  create  a  vastly  greater 
amount,  if  each  man  labors  entirely  upon  one,  tiian  if 
each  man  labors  upon  them  all.  The  product  of  the 
whole  ten,  therefore,  by  such  a  division  of  labor,  will  he 
greatly  augmented.  This  is  the  lliird  method  by  which 
the  productiveness  of  human  industry  may  be  increased. 

We  see,  then,  the  modes  in  which  the  productive 
power  of  man  ma)  be  exerted.  1.  Man  may,  unassist- 
ed, labor  to  the  extent  of  his  physical  ability.  2.  He 
may  multiply  his  power,  by  availing  himself  of  the  agents 
of  nature,  either  to  facilitate  the  creation  of  products, 
or  to  create  products  which  he  could  not  create  himseli  ; 
or,  3d.  He  may  economize  his  labor,  by  such  arrange- 
ments as  will  enable  him,  in  a  given  time  and  with  a  giv- 
en amount  of  fatigue,  to  accomplish  a  greater  amount  of 
production. 

It  is,  by  ado])ting  these  means,  that  the  human  race 
advances  from  the  savage  to  the  civilized  state.  With 
nothing  but  his  hands  and  feet,  man  could  not  subsist, 
except  in  the  most  temperate  climates.  His  food  would 
be  wild  fruits,  and  the  animals  which  he  could  run  down 
in  the  chase.  This  is  the  lowest  point  of  human  wretch- 
edness. It  is  a  laborious  and  incessant  struggle  to  ob- 
tain the  bare  means  of  prolonging  existence.  He  in- 
ve.its  a  bow  antl  arrow  ;  this  is  a  natural  agent,  or  a  tool 
by  which  he  avails  himself  of  the  elasticity  of  wood. 
IJy  this  simple  tool,  his  condition  is  materially  improved 
Still,  he  is  destitute  of  most  of  the  comforts,  and  fre- 
quently, at  times,  of  the  necessaries  of  life.  Hence,  in 
cold  climates,  great  numbers  of  savages  every  winter 
perish  from  cold  and  famine.  He  next  becomes  a 
shepherd.  Here  he  avails  himself  of  the  use  of  natural 
agents.  The  flocks  furnish  him  with  wool,  and  the 
herds  with  milk.  He  now  begins  to  taste  the  blessings 
of  a  regular  and  sufficient  supply  of  food  and  clothing. 
He  next  becomes  an  agriculturist.     Here,  in   addition 


OF    HUMAN    INDUSTRY    MAY    CE     INCREASED         59 

to  the  agents  formerly  employed,  he  makes  use  of  the 
earth,  manures,  and  implenients,  and  begins  rapidly  to 
accumulate  capital.  His  wants  increase,  and  a  division 
of  labor  is  necessary  to  supply  them.  He  now  advances 
with  rapid  progress,  and  at  every  step  employs  either 
new  agents,  or  else  old  agents  more  successfully,  divides 
his  labor  more  skilfully,  and  at  length  arrives  at  all  the 
blessings  of  mature  civilization. 

If  it  be  asked,  how  far  may  this  increased  productive- 
ness of  human  industry  be  carried,  we  answer,  it  is  im- 
possible to  tell,  unless  we  can  ascertain  how  great  are 
the  blessings  which  God  has  in  reserve  for  man.  Who 
can  estimate  the  benefits  conferred  on  man  by  the  mag- 
net, or  by  steamj  or  by  the  printing  press  ?  And  what 
reason  have  we  to  suppose  that  the  gifts  of  God  are 
exhausted,  or  that  there  are  not  other  and  more  excellent 
natural  agents  yet  to  be  discovered,  or  other  modes  of 
using  those  which  we  are  already  acquainted  with,  that 
shall  produce  even  more  surprising  results  than  any  which 
we  have  yet  witnessed  ?  Before  the  discovery  of  the 
agents  now  in  use,  the  most  vivid  imagination  could  never 
have  conceived  of  the  benefits  which  they  have  already 
conferred  upon  society.  There  is  no  reason  to  suppose, 
that  we  are  now  more  capable  of  fathoming  the  goodness 
of  God,  than  our  ancestors  were  thiee  or  four  hundred 
years  ago. 

And  hence  we  learn  the  inconceivable  importance  to 
a  nation,  of  science,  and  of  the  labors  of  those  who  are 
devoted  to  the  discovery  of  the  laws  of  nature,  and  to 
the  invention  of  new  modes  of  applying  these  laws  to 
the  service  of  man.  What  would  be  the  condition  ol 
the  world  at  the  present  moment,  if  the  knowledge  of 
navigation  and  magnetism,  and  of  the  laws  of  chemisay 
were  abolished  .''  Undiscovered  knowledge  is  just  as  rich 
in  the  means  of  human  hap()iness,  as  discovered  knowl- 
edge. And  hence,  that  nation  which  is  most  assiduously 
cherishing  the  means  for  availing  itself  of  the  benefit  of 
all  the  laws  of  the  Creator,  will  most  rapidly  provide  it- 
self with  the  comforts  and  conveniences  and  luxuries  of 
life    in  the  greatest  abundance  and  at   the  least  possible 


no  THE     CSE    OF    NATURAL    AGENTS. 

cost.  Who  can  tell  the  benefit  which  will  result  to  this 
country,  when  Geology  has  revealed  to  us  the  riches 
which  at  present  remain  hidden  from  our  view  beneath 
the  surface  of  the  soil  ? 


SECTION  I. 

OF    THE    USE     OF    NATUFvAL    AGENTS 

We  shall  now  proceed  to  consider  the  several  means 
by  which  the  productive  power  of  industry  may  be  in- 
creased. This  section  will  treat  of  the  use  of  natural 
agents. 

A  natural  agent.,  is  any  quality  or  relation  of  things 
which  can  be  used  for  the  purpose  of  assisting  us  in  pro- 
duction. 

Thus,  the  light  and  heat  of  the  sun  are  natmal  agents, 
without  the  aid  of  which  we  could  not  create  vegetable 
products. 

Caloric,  or  artificial  heat,  is  a  natural  agent,  without 
which  we  could  neither  cook  our  food,  prolong  our  lives 
m  cold  climates,  give  any  valuable  quality  to  metals,  nor 
create  steam  for  the  purpose  of  machinery.  Magnetism 
is  a  natural  agent,  by  which  we  are  enabled,  in  any  part 
of  the  earth,  to  know  in  what  direction  we  are  moving. 

'I'he  various  powers  and  instincts  of  animals  are  natu- 
ral agents,  by  which  we  accomplish  purposes  which  could 
nni  be  accomplished  without  them.  Thus,  the  farmer 
avails  himself  of  the  muscular  power  and  docility  of  the 
ox  and  the  horse  ;  the  huntsman,  of  the  fleetness  and 
scent  of  the  hound,  &c. 

Wind,  the  gravitating  power  cf  water,  and  steam,  are 
natural  agents,  by  means  of  w  hich  we  create  the  momen- 
tum necessary  to  various  operations  in  the  arts. 

Jl  tool.,  or  a  machine,  is  any  combination  of  matter, 
by  means  of  which  we  are  enabled  to  avail  ourselves 
of  the  fjualiiles  or  relations  of  a  natural   agtnit.      Thus, 


THK  USE  OK  NATURAL  AGENTS.         61 

/    a  lens,  or  burning  glass,  is  a  tool,  by  means  of  which 
we  concentrate,  for  useliil  purposes,  the  rays  of  the  sun. 

A  slooe,  or  a  fire  place,  is  an  instrument,  or  too),  by 
(vhich  we  avail  ourselves  of  the  calorific  properties  of 
fuel. 

A  mariner''s  compass  is  a  tool,  by  which  we  avail 
ourselves  of  the  peculiar  quality  of  the  magnetic  needle. 

A  water  wheel  is  a  tool,  by  means  of  which  we  avail 
ourselves  of  the  gravitating  power  of  water. 
/         A  steam  engine  is  a  tool,  by  means  of  which  we  avail 
ourselves  of  the  expansive  power  of  steam. 

The  only  difference  between  a  tool  and  a  machine 
IS,  that  the  one  is  more  complicated  than  the  other. 
A  common  hammer  is  a  tool,  by  means  of  which  we 
avail  ourselves  of  the  gravity  and  density  of  iron,  and 
''  of  the  power  of  the  lever.  A  trip-hammer,  by  which 
large  masses  of  iron  are  fashioned  and  wrought,  is  called 
a  machine,  but  the  principles  employed  are,  in  both 
cases,  the  same,  only  the  trip-hammer  is  moved  by  a 
natural  agent,  water,  or  steam,  while  the  common 
hammer  is  moved  by  the  hand. 

From  what  has  already  been  said,  it  will  be  easily 
perceived,  that  the  qualities  and  relations  of  natmal 
agents  are  the  gift  of  God,  and,  being  His  gift,  they 
cost  us  nothing.  Thus,  in  order  to  avail  ourselves  of 
the  momentum  produced  by  a  water-fall,  we  have  only 
to  construct  the  water-wheel  and  its  necessary  appen- 
dages, and  place  them  in  a  proper  position.  We  then 
have  the  use  of  the  falling  water,  without  further  ex- 
pense. As,  therefore,  our  only  outlay  is  the  cost  of 
I  the  instrument  by  which  the  natural  agent  is  rendered 
available,  this  is  the  only  expenditure  which  demands 
the  attention  of  the  political  economist. 

If  we  reflect  upon  the  varioys  natural  agents  em- 
ployed by  man,  we  shall  see  that  some  of  tliem  can 
be  used  without  any  tools  whatever.  Such  is  the  case 
/in  agricultural  labor,  with  air,  and  the  light  of  the  sun. 
Others  require  only  so  simjile  insiriuncnts,  that  their 
effect  u[)on  price  is  not  appreciable.  Thus,  a  mariner's 
conjiass,  which  would  last  for  twenty  years,  and  assist 
G 


62  OF    AT.ENTS    WHICH    CREATE    MOMENTUM. 

in  the  transportation  of  half  as  many  millions'  value  ol 
merchandise,  would  cost  but  a  few  dollars.  Others 
are  used  by  (s\v  persons,  and  for  particular  and  unusual 
purposes,  as  the  lens,  or  the  microscope.  It  is  only 
those  agents  which  require  for  their  employment, 
machinery  of  which  the  cost  is  appreciable,  and  which 
are  of  so  general  necessity,  that  their  use  enters  into 
consideration  in  estimating  the  expenses  of  production, 
that  require  to  be  specially  noticed  in  Political 
Economy. 

The  means  most  universally  required  for  creating 
change,  is  momentum,  or,  as  it  is  commonly  called, 
jiower.  Without  this,  in  agriculture,  no  change  in  ele- 
mentary form,  and,  in  mechanics,  no  change  in  aggre- 
gate form,  and  in  transportation,  no  change  in  place, 
can  be  eflected.  The  instruments  necessary  to  avail 
ourselves  of  the  natural  agents  which  create  jnomentum, 
or  which  enable  us  to  use  it  in  particular  methoda, 
are  very  numerous  and  very  costly,  and  form  a  l'aif.',e 
portion  of  the  fixed  capital  of  man.  The  natural  agt;{iis 
which  man  uses  for  this  purpose  are,  therefore,  tuose 
which  particularly  claim  our  attention  ;  and  to  these, 
the  remainder  of  this  section  will  be  devoted. 

The  natural  agents  connected  with  the  use  of  mo- 
mentum, may  be  divided  into  two  classes  : 

1.  Those  which  create  momentum. 

2.  Those  which  enable  us  to  use  it. 
1.    Of  those  ivhich  create  momentum. 

This  class  of  agents  may  be  subdivided  into  two 
kinds  :      1st.   Animate  ;  and,  2d.   Inanimate. 

1.  Jlnimate.  These  are,  beasts  of  draft  and  burden, 
generally.  The  most  common  of  these  are,  the  ox,  the 
horse,  and  the  mule  ;  others  in  use  in  particular  dis- 
tricts, are  the  camel,,  the  elephant,  the  dog,  and  the 
reindeer. 

The  subjection  of  animals  to  the  human  will  marks 
an  era  in  the  proejress  of  civilization  ;  and  teaches  us 
'hat  the  first  important  step  has  been  taken  in  the  im- 
orovetnent  of  the  condition  of  man,  and  of  the  produc- 
tiveness   of   hnniaii    industry.      The    ox   and  the   horse 


OF    ANIMATE    AGENTS.  63 

have  much  greater  physical  power  than  man.  They 
may  also  he  sustained  at  a  nuich  less  exjjense.  Their 
food  is  the  spontaneous  production  of  the  earth,  which, 
for  a  large  part  of  the  year,  they  gather  for  themselves, 
and  which  requires  no  labor  of  preparation.  They 
need  no  clothing  in  any  latitude,  and  in  the  warmer  parts 
of  the  temperate  zone,  need  no  shelter.  But,  in  con- 
sequence of  his  superiority  in  intellectual  endowment, 
man  can  direct  and  govern  the  physical  power  of  several 
of  these  animals,  and,  by  attaching  them  to  agricultural 
machines,  can  command  that  jiower  at  his  will.  If, 
then,  by  the  use  of  animals,  one  man  can  wield  a  j)hys- 
ical  force  equal  to  that  of  ten  men,  he  will  be  able  to 
produce,  by  the  labor  of  a  day,  ten  times  as  much  as  he 
could  before  the  introduction  of  animate  agents.  He 
will,  therefore,  by  the  same  amount  of  labor,  produce 
ten  times  as  large  an  amount  of  objects  of  desire  ;  that 
is,  of  means  of  human  happiness.  He  will  have  a 
larger  surplus  to  employ  in  fixed  capital  for  the  next 
year,  and  ihis  surplus  will  be  annually  increasing,  and 
increasing  at  the  rate  of  compound  interest.  He  will 
have  a  larger  portion  to  exchange  ;  hence,  he  will  be 
able,  also,  to  enjoy  a  larger  amount  of  his  neighbor's 
products.  He  will  be  able  to  exchange  with  a  greater 
number  of  producers  ;  hence,  he  will  have  a  larger 
number  of  his  desires  gratified.  And  when  once  this 
first  step  has  been  taken,  cajjital,  unless  destroyed  by 
man's  perverse  moral  dispositions,  must  increase  so 
rapidly,  that  the  mechanical  arts  soon  commence,  and 
permanent  improvements  ana  intellectual  cultivation  will 
follow  in  rapid  succession. 

In  the  earliest  stages  of  society,  animate  power  must 
he  used  for  the  production  of  momentum,  in  all  the 
three  departments  of  human  industry.  In  the  labors  of 
agriculture,  it  is  still  employed,  and  must  probably  be 
thus  employed  forever.  Nothing  has  yet  superseded 
itj  and  there  is  reason  to  doubt  whether  any  thing  ever 
will  supersede  it.  In  this  respect,  therefore,  so  far  as 
the  means  for  the  creation  of  momentum  are  concerned, 
the   early  and  the  later  periods  of  society  remain  on  a 


61  OF    INANIMATE    AGENTS. 

level.  The  improvemsiits  that  have  been  made  by  the 
aitroductioii  of  other  creative  forces,  have  generally 
been  connected  with  the  other  modes  of  operative 
industry. 

2.  Of  Inanimate  J^Tatural  Agents.  The  inanimate 
agents,  most  commonly  in  use,  are  :  The  explosive 
force  of  Gunpowder  ;  JVind  ;  The  gravitating  p-Acsr 
of  JVater  ;  and  The  expansive  power  of  Steam. 

1.  Gunpowder  is  used  in  the  blasting  of  rocks,  in 
hunting,  and  in  war.  -  Its  value,  in  the  blasting  of  rocks, 
is  very  considerable.  By  drilling  a  small  hole,  which 
may  be  done  by  one  man  in  a  day,  and  by  the  use  of  a 
few  ounces  of  gunpowder,  a  force  may  be  exerted, 
in  an  instant,  producing  an  effect  which,  twenty  men, 
for  several  days,  could  not  otherwise  have  exerted. 
Hence,  it  is  of  very  great  use  in  all  works  of  internal 
improvement,  where  rocks  must  be  removed,  in  order 
to  admit  the  passage  of  railroads  and  canals.  In  fact, 
it  is  doubtful  whether  many  of  the  most  important  of 
these  works  could  ever  have  been  executed,  but  for  this 
agent.  Others,  if  the  execution  of  them  were  possible, 
must  have  been  accomplished  at  so  great  an  expense, 
that  the  investment  of  capital  in  them  would  not  have 
been  profitable,  and,  of  course,  it  would  not  have  been 
made. 

Gunpowder  is  also  used  extensively  in  war.  If  war 
be  beneficial,  or  even  necessary,  gunpowder  is  an  agent 
of  the  utmost  importance  ;  for,  by  no  other  means  yet 
discovered,  is  it  possible  to  destroy  so  many  men,  with 
so  little  physical  suffering,  and  with  so  httle  persona) 
labor.  It  has  also  a  moral  advantage  over  other  meth- 
ods of  slaughter,  inasmuch  as  the  destruction  of  human 
life,  in  this  manner,  excites  less  sensibly  the  ferocity 
of  the  human  heart.  On  this  account,  wars,  since  ita 
introduction,  have  been  conducted  on  more  humane  j)rin- 
ciples  than  formerly.  It  has  also  been  a  valuable  aux- 
iliary to  the  progress  of  civilization,  since  it  has  confer- 
red on  civilized,  an  undisputed  mastery  over  uncivilized 
liHiions.  There  has  not  been,  for  centuries,  any  danger 
1o  (/hristendom  from  barbarian  invasion.      Besides,  the 


OF    INANIMATE    AGENTS.  65 

»nore  eneigetic  are  the  means  of  destriictiori  in  war,  the 
less  is  tlie  loss  of  life  in  battle.  Hence,  of  a  given 
number  of  combatants  in  an  engagement,  a  much  sn)aller 
proportion  is  now  slain  than  formerly.  'J'liis  might  al- 
most give  rise  to  the  seemingly  paradoxical  hope,  that 
some  means  of  destruction  might  yet  be  invented,  so 
overwhelming  in  its  effects,  as  to  put  the  smallest  num- 
ber of  men  on  a  level  with  the  greatest,  and  hei  ce  to  put 
an  end  to  wars  altogether. 

2.  Another  agent  used  for  the  creation  of  momen* 
turn,  is  IVind.  Wind,  as  a  stationary  agent,  is  an  impor- 
tant mechanical  power,  in  countries  destitute  of  water 
pover,  or  of  the  fuel  necessary  for  the  production  of 
steam,  or  of  the  capital  which  must  be  invested  in  the 
machinery  required  in  the  use  of  more  expensive  agents. 
Its  principal  advantage  is  its  cheapness.  It  costs  noth- 
ing to  create  it,  and  the  machinery,  by  which  it  is  ap- 
plied, is  simple,  and  easily  constructed. 

The  disadvantages  of  wind,  are  its  uncertainty,  both 
in  quantity  and  in  time,  and  the  difficulty  with  which  it 
is  regulated.  In  consequence  of  the  irregularity  of  its 
force^  it  is  impossible  to  emi)loy  it  in  labor  requiting  del- 
icacy of  operation  :  and,  in  consequence  of  its  uncer- 
tainty in  time,  it  could  not  be  employed  where  the  labor 
of  many  i)ersOns  was  dependent  on  its  assistance. 

As  a  locomotive  power,  on  water,  wind  is  almost  imi- 
versally  used  in  navigation.  Though  the  direction,  in 
which  it  acts,  is  variable  ;  yet,  nautical  skill  enables  us 
io  use  it  when  blowing  from  almost  any  point  whatever. 
Its  variation,  in  the  quantity  of  force,  is  here  also  a  mat- 
ter of  less  consequence,  since  this  circumstance  can 
affect  the  operation  to  be  performed,  only  in  respect  to 
time.  And  variation,  even  in  this  respect,  has,  in  a 
great  degree  yielded  to  science  and  enterprise.  It  is 
astonishing  to  observe  with  what  precision  and  certainty 
voyages  are  now  made  between  New  York  and  Liver-' 
pool.  Hence,  this  agent  hns,  until  lately,  been  univer- 
sally used  in  the  navigation  of  the  ocean.  With  the  in- 
ventions of  Fulton  a  new  era  commenced.  Steam  verv 
soon  was  employed  iu  the  place  of  wind  in  the  naviga- 


66  OF    INANIMATE    AGENTS. 

tion  of  rivers  and  along  the  sea-board.  It  was  not,  how 
ever,  until  the  year  lbo7  that  the  experiment  was  suc- 
cessfully made,  of  establishing  a  regular  communication 
between  Europe  and  America  by  means  of  steam.  In 
the  May  of  that  year,  the  steamers  Sirius  and  Great 
Western,  the  former  from  Liverpool,  the  latter  from 
Bristol,  arrived  in  New  York.  Since  that  lime  passages 
have  continued  to  be  made  between  the  above  ports 
ivitl'j  great  regularity,  and  thus  far  without  disaster  or  ac- 
cident. It  is  demonstrated  that  the  navigation  of  the 
Atlantic,  by  steam,  is  as  perfectly  within  the  power  of 
man,  as  the  navigation  of  the  Thames  or  the  Hudson. 
Steamers  are  also  at  present  plying  regularly  from 
France  and  Great  Britain  to  every  })art  of  the  Mediter- 
ranean. Steamers  now  leave  Boston  and  Liverpool 
twice  every  month,  and  very  rarely  have  they  failed  to 
arrive  within  twelve  hours  of  their  appointed  time  at  any 
season  of  the  year. 

3.  Another  agent,  used  for  the  creation  of  momen- 
tum is  the  gravitating  power  of  Water.  This  is  used 
only  as  a  stationary  agent.  Its  advantages  are,  that  it  is 
cheap,  tolerably  constant,  and  frequently,  is  capable  of 
exerting  great  mechanical  force.  Its  disadvantages  are, 
that  it  is  stationary  ;  that  is,  that  it  can  be  used  only  in 
situations  where  it  has  been  created  by  natuie.  Hence, 
it  is  frequently  at  a  considerable  distance  from  the  sea- 
ports whence  the  manufacturer  derives  his  su})plies,  and 
whence  he  exports  his  products.  In  such  cases,  the 
cost  of  transportation  must  be  deducted  from  the  profits 
of  the  establishment,  and  is  of  course,  to  this  amount,  a 
diminution  of  their  value. 

Water  cannot  always  be  commanded  in  sufficient 
quantity.  Very  few  mill-seats  are  secure  fiom  the  lia- 
bility to  sufl'er  from  the  want  of  water.  This  is  a  great 
inconvenience,  inasmuch  as,  in  seasons  of  drought,  a 
large  number  of  the  laborers  must  be  unemployed,  and 
a  large  poition  of  the  expenses  of  the  establishment 
must  be  incurred,  without  yielding  any  remuneration  to 
ihe  proprietor. 

Another  disadvantage  of  water  |)ovver  is,  that  it  is  lia- 


OF    INANIMATE    AGENTS.  67 

ble  to  danger  from  iinindaiion.  Though  this  may  be 
guarded  against,  in  many  cases  ;  yet,  it  frequently  can 
be  (lone  only  at  an  ex[)ense  which  greatly  reduces  the 
cheapness  of  the  agent.  Noluiihstanding  liicse  dis:id- 
v'aniages,  water  power  will  probably  be  always  used, 
where  great  mechanical  force  is  required  ;  where  the 
machinery  to  be  employed  is  simple,  and  where  the  op- 
eration does  not  require  the  greatest  possible  nicety  of 
execution. 

4.  The  power,  however,  most  commonly  in  use  ai 
present,  is  Steam.  Its  advantages  are,  that  it  can  be 
used  to  create  any  required  degree  of  mechanical  force  ; 
that  it  is  perfectly  under  human  control  ;  that  it  may  be 
( reated  in  any  place  where  fuel  can  be  obtained  ;  that  it 
can  be  us3d  at  will,  either  as  a  stationary,  or  a  locomo- 
tive power  ;  and  that  it  can  be  made  to  act  with  perfect 
regularity.  Its  only  disadvantage,  is  its  expensiveness. 
The  machinery  by  which  it  is  generated  is  costly,  and 
requires  frequent  repairs  ;  and  the  fuel,  by  which  it  is 
maintained,  is  a  very  serious  item  of  consumption.  The 
price  of  engines,  however,  will  be  gradually  reduced,  as 
the  demand  for  them  increases.  And  it  is  probable, 
that,  by  improvement  in  their  construction,  the  consump- 
tion of  fuel  will  be  greatly  diminished  ;  while  increased 
facilities  for  transportation  will  materially  reduce  its 
price.  The  introduction  of  steam  power  has  greatly  re- 
duced the  price  of  fuel  in  Great  Britain. 

The  question  whether  steam  or  water  power  should 
be  used  in  any  particular  case,  is,  I  suppose,  to  be  de- 
cided by  their  relative  expnnsiveness.  This  will  be  de- 
cided, principally,  by  tlie  i)la('e  in  which  the  power  may 
be  retjuired.  Water  power  will  generally  be  the  cheaper 
where  it  can  be  procured  in  abundance,  and  sufficiently 
near  to  a  market  or  to  lid'?  water.  But  where  it  is  vari- 
able in  quantity,  or  is  at  a  considerable  distance  from  the 
place  of  delivery,  the  cost  of  transportation  will  fre- 
quently overbalance  its  other  advantages,  and  render 
steam  power  the  more  economical.  Machinery,  pro- 
pelled by  steam,  can  be  erected  and  carried  on  upon  a 
wharf,  or  ia  the  midst  of  a  city  ;  and  hence  it  avoids  all 


58  ANIMATE    AND    ITANIMATE    AGENTS. 

the  cost  of  unnecessary  transportation  Machinery, 
propelled  by  water  power,  can  be  erected  only  at  the 
place  where  the  water  power  exists,  and,  of  course,  is 
subject  tc  all  the  expense  of  transportation  between  that 
place  and  the  market. 

The  ADVANTAGES  of  inanimate  over  animate  natural 
agents^  are  several. 

1.  Inanimate  agents  can,  within  a  small  compass,  and 
with  comparatively  little  weight,  produce  a  vastly  greater 
amount  of  momentum,  than  animate  agents.  Thus,  a 
steam  engine,  of  one  hundred  and  fifty  or  two  hundred 
horse  power,  occupies  but  a  small  space,  and  forms  but 
a  small  part  of  the  cargo  of  a  vessel.  But  so  great  a 
number  of  horses  could  scarcely  be  carried  in  any  vessel 
designed  to  transport  either  freight  or  passengers  ;  and, 
besides,  no  mechanical  arrangement  has  yet  been  devis- 
ed, by  which  such  a  number  of  aninials  could  conven- 
iently be  employed  upon  one  operation. 

2.  They  are  continuous ;  that  is,  they  are  never  liable 
to  fatigue,  and  never  need  rest.  Animals  must  spend 
the  greater  part  of  their  time  in  feeding  or  in  repose. 
Specially  is  this  the  case,  if  they  are  worked  rapidly. 
During  this  time,  the  labor  which  they  perform  must 
either  be  suspended,  or  else  other  animals  must  take  their 
place.  A  horse  cannot  labor  severely  for  more  than 
eight  hours  in  twenty-four.  Hence,  if  the  uninterrupted 
labor  of  horses  were  required  for  twenty-four  hours, 
three  relays  must  be  provided.  Thus,  if  a  boat  were 
required  to  perform  a  voyage  in  twenty-four  hours,  she 
must  employ  three  relays  of  horses  ;  that  is,  a  steam 
boat,  worked  by  a  power  equal  to  that  of  one  hundred 
and  fifty  horses,  would  require  four  hundred  and  fifty 
horses,  in  order  to  create  the  necessary  momentum. 

3.  Hence,  there  is  a  great  gain  in  Economy.  The 
first  cost  of  inanimate  is  generally  less  than  that  of  an- 
imate agents  ;  the}'  are  liable  to  no  diseases  ;  they  re- 
quire no  food  ;  and  create  expense  only  while  they  are 
perforu^ing  their  work.  Were  the  labor  now  performed 
by  steam,  to  be  pe"formed  by  horses,  the  price  of  the 
ordinary  necessaries  of  life   would    be  quadrupled,  and 


ANIMATE   AND   INAMMATE    AGENTS.  69 

n)any  articles  of  ordinary  use  would  be  placed  out  of  the 
read)  of  any  but  liie  most  opulent.  Nor  is  this  all. 
The  subs'.iiution  of  inanimate  for  animate  power,  has  a 
great  tendency  to  reduce  the  cost  or  to  increase  the 
supply  of  all  agricultural  products.  Su[)pose  that,  by 
the  u.;e  of  steam,  one  thousand  horses  can  be  dispensed 
with  A  horse  requires  for  sustenance,  throughout  the 
year,  as  much  agricultural  produce  as  would  support 
eight  men.  If,  then,  these  one  thousand  horses  can  be 
dispensed  with,  there  may  be  produced,  on  the  land 
which  was  formerly  employed  for  the  production  of  h<i}», 
as  much  wheat  as  will  support  eight  thousand  men. 
This  must,  at  first,  reduce  the  price  of  wheat  ;  and  the 
result  would  be,  that  the  district  would  support  eight 
thousand  more  men  than  before. 

4.  There  is  also,  commonly,  a  gain  in  personal  safe- 
ty. Inanimate  agents  act  under  laws  which  may  be 
known  and  obeyed,  and  of  which  the  results  may  be 
commonly  foreseen  and  guarded  against.  Animals  are 
endowed  with  passions  and  will,  which  we  can  frequently 
neither  control  nor  influence.  Besides,  the  greater  ex- 
pensiveness  of  the  individual  machines  employed  in  the 
use  of  inanimate  agents,  renders  it  for  the  interest  of  the 
proprietor,  to  employ  men  of  experience  and  responsi- 
bility to  manage  them.  This  very  sensibly  diminishes 
the  risk.  When  we  reflect  upon  the  vast  amount  of 
travelling  by  steamboats  and  railroads,  it  njust  be  evi- 
dent, that,  notwithstanding  the  accidents  ^^  which  they 
are  liable,  a  vastly  greater  amount  of  human  life  would 
be  sacrificed,  if  the  same  number  of  persons  were  trans- 
ported by  horses.  It  is  also  to  be  remembered,  that 
the  use  of  steam  is  yet  in  its  infancy,  and  that  gieater 
experience  and  skUI  will  materially  reduce  the  number 
of  accidents  to  which  this  mode  of  conveyance  is  at 
present  liable. 

5.  Inanimate  agents  can  be  used  icithout  the  injiiction 
of  pain.  Inanimate  agents  are  insensible.  Where  the 
lai)or  to  be  accomplished  is  either  severe,  or  where  it 
requires  great  speed,  animals  must  be  rapidly  destroyed. 
This  exposes  them  to  great  sufl'ering.     A  horse   in  a 


70         MEANS   BY   WHICH   MOMENTUM    IS   APPLIED. 

Stage  coach  can  rarely  travel,  rapidly^  more  than  tea 
miles  a  day  ;  and  most  horses  will  endure  even  this  la- 
bor but  for  a  short  time.  From  this  suflering  inanimate 
power  is  exempt.  It  never  endures  pain  irom  being 
over  driven. 

6.  Animate  power  decreases  with  velocity.  Hence, 
we  must  soon  arrive  at  a  point  beyond  which  it  can  no 
further  be  used  to  create  momentum.  If  we  represent 
the  tractive  force  of  a  horse,  when  moving  at  two  miles 
an  hour,  at  lUO,  his  force  at  the  rate  of  three  miles,  will 
be  81  ;  at  the  rate  of  four  miles,  64  ;  at  the  rate  of  five 
miles,  49  ;  at  the  rate  of  six  miles,  36  ;  while  at  the 
top  of  his  speed,  he  can  carry  nothing  more  than  his 
own  weight.  An  engine,  on  the  contrary,  may  be  made 
to  work  as  powerfully  at  one  degree  of  velocity  as  at  an- 
other. In  all  cases,  therefore,  in  which  both  great  pow- 
er and  great  velocity  are  required,  inanimate  power 
must,  of  necessity,  be  employed. 

From  these  causes,  we  see  that  inanimate  is  rapidly 
taking  the  place  of  animate  power,  both  where  stationaiy 
and  where  locomotive  force  is  required.  By  the  addi- 
tional spee(;l  which  it  is  capable  of  producing,  it  gives 
rise  to  great  economy  of  time.  This,  to  all  persons  en- 
gaged in  active  employments,  is  a  consideration  of  va^t 
moment.  Being  a  continuous  agent,  it  is  also  enabled  to 
act  with  the  greatest  certainty.  Hence,  men  may  ad- 
just their  transactions,  in  different  places,  with  entire 
precision.  This  is  also  another  source  of  economy, 
both  of  lime  and  of  capital.  And,  besides,  notwith- 
standing the  expensiveness  of  the  arrangements  for  the 
rse  of  locomotive  forces,  yet  the  amount  of  additional 
travelling  to  which  they  give  rise,  is  so  great,  that  the 
rxpensiveness  of  transportation  between  different  places 
13,  in  general,  njaterially  diminished. 

J[.    Of  the  natural  agents  by  which  momcntvm  is  ap- 

PMKU. 

It  is  obvious,  that  a  great  addition  is  made  to  human 
power,  where  the  agents  for  creatinjr  momentum  have 
been  discovered.  But  this  is  not  all.  Several  combi- 
na'ions  of  matter  may  be  formed,  Ly   which  mere   hu- 


jt 


MEANS   BY   WHICH  MOMENTUM  IS    APPLIED.  7\ 

man  force  may  be  greatly  assisted,  and  which,  by  'leing 
united  with  the  agents  for  creating  nionicntuni,  nu<y 
greatly  increase,  and  vary,  and  give  adaptation  to,  its  -^ 
(itihty.  These  are  called  the  mechanical  powers,  which 
are  treated  of  at  large  in  works  on  Mechanics  and  i\at- 
iiral  Philosophy.  In  their  simple  form,  they  are  the  y 
lever,  the  wheel  and  axle,  the  inclined  plane,  the  screw, 
the  pulley,  and  the  wedge.  They  are  variously  combin- 
ed, hi'  pi-odncing  the  ditlerent  results  of  mechanics,  bul 
may  be  all  redut'ed  to  these  simple  elements. 

B}  means  of  these,  the  muscular  povver  of  man  is  en. 
abled  greatly  to  increase  its  effect  ;  that  is,  a  man  by 
his  own  strength  can  now  accomplish  labor  which  he 
could  not  accomplish  without  them.  Though  these  m- 
struments  give  no  new  strength,  yet  they  greatly  increase 
the  effectiveness  of  that  which  already  exists  ;  and 
hence,  their  invention  marks  an  important  era  in  the  pro- 
gress of  civilization.  It  is  also  to  be  remarked,  that 
their  origin,  in  point  of  time,  is  far  in  advance  of  the  dis- 
covery of  the  creative  agents.  Archimedes  had  made 
great  progress  in  the  discovery  and  application  of  these 
inodifjjini^  powers,  when  the  use  of  creative  agents  was 
almost  unknown. 

The  trium[)h  of  human  skill  is,  however,  achieved, 
when  these  two  forms  of  natural  agency  are  combined 
in  a  single  machine.  By  the  one  we  generate  power,  to 
what  extent  soever  we  choose ;  and  by  the  otiier  we 
modify  it  in  any  form,  give  to  it  any  application,  and 
direct  it  to  any  purpose,  that  our  convenience  may 
require.  It  is  in  this  manner,  that  man  renders  all  the 
various  powers  of  nature  tributary  to  himself.  He  can 
thus  create,  and  use  as  he  pleases,  as  great  a  powei  as 
he  desires.  He  devolves  the  labor  on  nature,  and  he 
has  only  to  fabricate  the  Instruments,  and  give  them  their 
direction.  He  is  successful  just  in  proportion  as  he 
does  this;  since  nature  always  works  with  undeviating 
accuracy,  with  unerring  skill,  with  indefatigable  perse- 
verance ;  and  she  always  works  for  nothing. 

Tt  may  be  useful  to  specify  some  of  the  results  ac- 
conipi'rhcd   by  the  various  instruments,  which  man  em- 


72       MEANS    BY    WHICH    MOMENTUM    IS    API'LIED. 

ploys  for  modifying  that  momentum  which  is  exerted  by 
the  firs^ class  of  natural  agents. 

1.  We  are  thus  enabled  to  change  the  direction  of 
the  power.  Thus,  in  the  cylinder  of  the  steam  engine, 
the  momentum  is  created  either  in  perpendicular  or  hor- 
izontal strokes.  This,  being  by  means  of  an  arm  and  a 
crank  changed  into  a  circular  motion,  moves  the  paddle- 
wheels  of  a  steamboat.  Thus,  also,  in  the  machinery 
for  moving  a  trip-hammer,  a  circular  is  changed  into  a 
perpendicular  motion,  by  the  striking  of  the  cogs  of  a 
wheel  upon  the  short  arm  of  a  lever,  while  the  hammer 
is  attached  to  the  other  arm. 

2.  We  exchange  poiver  for  velocity.  This  is  done  in 
all  spinning  machinery.  By  water  or  by  steam,  we 
cause  a  large  wheel  to  revolve  ten,  twenty,  or  thirty 
times  in  a  minute,  and  with  a  power  equal  to  that  which 
could  be  produced  by  fifty  or  one  hundred  horses.  In 
spinning,  however,  we  need  small  power,  but  great  ve- 
locity. Hence,  by  the  combination  of  various  large  and 
small  wheels,  we  produce  a  velocity,  in  a  thousand  spin 
dies,  equal  to  many  thousand  revolutions  in  a  minute. 
The  whole  of  this  fifty  or  one  hundred  horse  power,  is 
thus  spread  over  a  large  manufactory,  and  adapted,  by 
various  contrivances,  to  every  degree  of  velocity,  and 
every  form  of  motion  that  may  be  required. 

3.  We  are  thus  enabled  to  exert  forces.too  great  for 
animate  power.  By  water  power,  or  by  steam,  we  caa 
generate  as  great  a  force  as  we  please  ;  and  we  have 
only  to  combine  with  it  the  proper  adjustments,  in  ordei 
to  exert  upon  any  point  any  momentum  which  we  desire. 
The  power  required  to  roll  and  hammer  iron,  or  copper, 
to  propel  steamboats,  to  forge  anchors,  and  that  used  in 
several  other  of  the  arts,  is  greater  than  could  be  exert- 
ed by  any  animate  force  with  which  we  are  acquainted, 
unless  it  were  exerted  by  means  of  some  combination 
of  the  mechanical  forces. 

4.  We  are  thus  also  enabled  to  execute  operations  too 
delicate  for  human  touch.  Very  delicate  operations, 
soon  weary  the  nervous  system  by  the  excessive  alten- 
tion  which  they  of  necessity   require.      Thus,  in  order 


MEANS    BY     WHICH     MOMENTUM    IS    AI'lLlED.       73 

10  spill  tho  finest  thread  on  a  spinning  wlieel,  there  nnist 
be  great  accuracy,  both  in  the  velocity  of  the  wheel. 
and  in  the  muscular  power  exerted  in  drawing  out  llie 
thread.  This  requires  an  effort  of  attention,  which  the 
liunian  system  cannot  long  maintain,  and,  of  course,  the 
thread  will  frequently  be  uneven.  But  by  means  of 
machinery,  both  of  these  operatio:?s  may  be  adjusted 
with  mathematical  accuracy  ;  and  as  machines  have  no 
nerves,  they  will  be  perfectly  faithful  to  that  adjustment. 
Thus  we  invariably* see  that  the  most  delicate  fabrics  are 
those  that  are  wrought  by  natural  agents.  Hence  ma- 
chinery is  necessarily  used  in  the  manufacture  of  such 
articles  as  require  for  their  formation  identity  of  result, 
such  as  screws,  types,  &c. 

5.  By  means  of  machinery,  we  are  enabled  to  accu- 
mulnte  power.  We  thus  exchange  a  continuous  and 
small  force,  for  a  sudden  and  violent  one.  Such  is  the 
case  with  the  pile-driver,  and  the  common  beetle  or  mal- 
let, when  used  in  combination  with  the  wedge. 

G.  By  the  same  means  we  are  enabled  to  exchange  a 
short  and  irregular  effort  for  a  continuous  and  regular 
movement,  or  to  sjjread  the  action  of  a  short,  over  a  long 
period  of  time.  This  is  done  in  clocks,  watches,  and 
other  similar  machinery.  Here  we  spread  the  action  of 
a  minute,  over  a  day,  or  a  week,  and  with  almost  math- 
ematical accuracy. 

In  consequence  of  the  above  mentioned  applicalion 
of  machinery,  various  other  advantages  are  realized  in 
production.  For  instance  ;  there  is  frequently  a  great 
saving  of  material,  as  in  the  change  from  making  boaids 
with  the  adze,  to  that  of  making  them  with  the  saw  ; 
and  again  the  labor  of  natural  agents  is  so  much  cheap- 
er, that  many  articles,  which  would  otherwise  have  been 
worthless,  are  now  deserving  of  attention,  as  ihoy  may 
now  be  profitably  endowed  with  some  form  of  value. 

I  close  these  remarks,  upon  the  use  of  natural  agents, 
with  an  extract,  very  graphically  describing  the  power 
of  the  steam  engine,  which  has  commonly  been  ascribed 
to  Francis  Jeffrey,  Esquire,  now  Lord  Jeffrey,  of  Ed- 
inburgh : 

7 


74       MEANS    BY    WHICH    JIOMENTUM    IS    APPLIEO 

"  It  (the  steam  engine)  has  become  a  thing,  stupen- 
dous alike  for  its  force  and  its  flexibility  ;  for  the  prodi- 
gious power  which  it  can  exert  ;  and  the  ease,  precision, 
and  ductility  with  which  it  can  be  varied,  distributed,  and 
applied.  The  trunk  of  an  elephant,  that  can  pick  up  a 
pin  or  rend  an  oak,  is  as  nothing  to  it.  It  can  engiave 
a  seal,  and  crush  masses  of  obdurate  metal  before  it ; 
draw  out,  without  breaking,  a  thread  as  fine  as  a  gossa- 
mer ;  and  lift  up  a  ship  of  war,  like  a  bauble  in  the  air. 
It  can  embroider  muslin,  and  forge  anchors  ;  cut  steel 
into  ribands,  and  impel  loaded  vessels  against  the  fury 
of  the  winds  and  waves. 

"It  would  be  difficult  to  estimate  the  value  of  the 
benefits  which  these  inventions  have  conferred  upon  the 
country.  There  is  no  branch  of  industry  that  has  not 
been  indebted  to  them,  and  in  all  the  most  material,  they 
have  not  only  widened  most  magnificently  the  field  of  its 
exertions,  but  multiplied,  a  thousand  fold,  the  amount  of 
its  productions.  It  is  our  improved  steam  engine,  that 
nas  fought  the  batdes  of  Europe,  and  exahed  and  sus- 
tained, through  the  late  tremendous  contest,  the  political 
greatness  of  our  land.  It  is  the  same  great  power, 
which  enables  us  to  pay  our  national  debt,  and  to  main- 
tain the  arduous  struggle  in  which  we  are  still  engaged, 
with  the  skill  and  capital  of  countries  less  oppressed  with 
taxation. 

"  But  these  are  poor  and  narrow  views  of  its  impor- 
tance. It  has  increased,  indefinitely,  the  mass  of  human 
comforts  and  enjoyments,  and  rendered  cheap  and  acces- 
sible, all  over  the  world,  the  materials  of  wealth  and 
prosperity.  It  has  armed  the  feeble  hand  of  man,  in 
short,  with  a  power  to  which  no  limits  can  be  assigned  ; 
completed  the  dominion  of  mind  over  the  most  refractory 
qualities  of  matter  ;  and  laid  a  sure  foundation  for  all 
those  future  miracles  of  mechanical  power,  which  are  to 
aid  and  reward  the  labors  of  after  generations.  " 


SECTIOxN  II. 

OF     DIVISION     OF    LABOR. 

We  have  shown  that  the  productiveness  of  human  in- 
dustry may  be  greatly  increased  by  tjie  discovery  of  the 
(jualities  and  relations  of  things,  and  by  the  invention  of 
instruments,  by  which  those  qualities  may  be  applied  and 
modified.  In  this  manner,  the  power  of  man  receives 
an  almost  incalculable  augmentation.  But  this  is  not 
all.  Jt  is  found  that  the  result  of  human  eflbrt  may  be 
still  further  very  greatly  increased.  Thus  :  sujiposing 
the  agents  of  nature,  and  also  their  mode  of  application, 
to  be  known,  and  that  a  given  number  of  men  are  about 
to  perform  an  operation,  they  may  make  such  arrange- 
ments among  themselves,  as  will,  in  a  given  time,  and 
with  a  given  expenditure  of  labor,  enable  them  to  accom- 
plish a  vastly  greater  result  than  could  be  accomplished 
without  such  arrangements.  The  mode,  in  which  this  is 
effected,  is  by  division  of  labor. 

Division  of  labor  is  always,  to  some  degree,  employed 
where  dilierent  individuals  are  engaged  in  the  different 
branches  of  human  industry.  Thus,  labor  is  divided 
when  different  persons  employ  themselves  in  the  several 
departments  of  discovery,  aj)plication,  and  operation. 
Labor  is  still  further  divided,  when  those  employed  ni 
these  great  dej)artmcnts,  are  separated  into  distinct 
classes,  each  class  devoting  itself  to  the  accomplishment 
of  one  particular  object.  Thus,  one  man  investigates 
the  laws  of  mechanics  ;  another,  those  of  astronomy  ; 
and  a  third,  those  of  vegetation.  One  man  is  devoted 
to  the  profession  of  the  law  ;  and  another,  to  that  of 
medicine  ;  while  each  separate  trade  is  employed  in  the 
creation  of  a  particular  product.  By  all  these  divisions, 
h  is  manifest  that  the  result  of  the  whole  is  greatly  in- 
creased. It  is  only  the  sn\  age,  that  combines  in  his 
own  person,  in  all  their  departments,  the  character  of 
ohilosopher,  inventor,  and  operator.     He  approxin\ates 


76  DIVISION    OF    LABOR. 

to  the  civilized  state,  only  in  so  far  as  he  begins  to  con 
fine  himseh*  to  some  particular  calling.     And  it  is  always 
in  the  most  advanced  periods  of  riv':ization,  that  division 
of  labor  is  carried  to  its  ultimate  limits. 

But,  besides  this,  the  different  parts  of  any  operation 
may  be  analyzed  ;  and  to  each  part  the  whole  labor 
of  a  single  individual  may  be  confined.  Thus,  the  la- 
bor of  making  a  pin  may  be  divided  into  wire  drawing, 
wire  straightening,  pointing,  heading,  tinning,  &c.  In 
Political  Economy,  labor  is  said  to  be  divided,  just  in 
so  far  as  these  several  processes  are  assigned  to  separate 
operators.  It  is  found,  by  experience,  that  such  an  ar- 
rangement increases  the  productiveness  of  human  labor 
to  an  extent,  which,  to  a  person  who  had  not  examined 
the  facts,  would  appear  wholly  incredible.  The  princi- 
ples on  which  this  increased  productiveness  of  labor 
depends,  are  the  following : 

1.  Division  of  labor  shortens  the  period  required  for 
learning  an  operation.  The  more  complicated  the  oper- 
ation, the  longer  is  the  time  necessary  for  acquiring  the 
skill  requisite  to  the  performing  of  it  successfully.  But 
this  time  spent  in  learning,  is  useless  to  the  operator  and 
to  society,  only  in  so  far  as  it  is  necessary  to  the  crea- 
*ion  of  the  product.  The  longer  the  time  necessary  for 
learning  an  operation,  the  higher  must  be  the  wages  of 
the  operator,  for  the  remainder  of  his  life  ;  and  also,  of 
course,  the  greater  must  be  tlie  price  of  his  products. 
If  this  can  be  lessened,  the  price  of  course  will  fall. 
Now,  that  this  is  lessened,  by  division  of  labor,  is  evi- 
dent from  an  obvious  examj)le.  Suppose  that  a  given 
process,  say  the  making  of  nails,  consists  of  seven  oper- 
ations ;  and  that  each  of  these  operations  required  one 
year's  practice,  before  it  could  be  successfully  perform- 
ed. Now,  if  seven  men  were  to  learn  this  occupation, 
and  each  one  were  obliged  to  learn  every  operation,  the 
time  required  would  be  7  X  7  ^49  years  ;  whereas,  if 
each  of  them  were  required  to  learn  ])ut  one,  the  time 
wou'd  be  but  7  X  1  =7,  or,  the  difference  would  be, 
49  —  7=^42  years  of  human  labor,  or  six  sevenths  of 
the  whole   time,  vhicb   would  thus   be    saved       There 


DIVISION    OF    L\nOR.  77 

would  be  six  years  more  of  produclive  labor,  in  the  life 
of  each  of  these  men  ;  and,  as  they  had  spent  less  lime 
in  acquiring  their  art,  they  could  aflord  to  exercise  it  fur 
lower  wages. 

Besides,  there  is,  intimately  connected  with  this  cause, 
another,  of  considerable  importance.  Every  one,  in 
learning  an  art,  must,  by  unskilfulness,  destroy  a  consid^ 
erable  portion  of  capital.  And  this  amount  of  ca[)ital 
will  be  in  proportion  to  the  number  of  operations  which 
he  is  obliged  to  learn.  Thus,  sujjpose  that  a  man  learns 
seven  operations,  and,  in  learning  each,  destroys  -ten 
dollars'  worth  of  capital,  the  amount  which  he  will  de- 
strov,  in  acquiring  his  whole  trade,  will  be  7  X  10  =  70. 
If  he  have  to  learn  but  one,  it  will  be  but  ten  dollars  ; 
and  thns,  the  diderence  will  be  70 — 10  =  GO  dollars, 
upon  every  such  individual.  A  difierence,  so  great  as 
these  two  combined,  when  spread  over  the  whole  face 
of  society,  will  have  no  inconsiderable  effect  upon  the 
annual  nett  revenue  of  a  community. 

2.  When  one  man  performs  all  the  operations  required 
in  a  complicated  process,  much  lime  is  lost  in  passing 
from  one  oj)eration  to  another.  By  division  of  labor, 
this  loss  is  avoided. 

The  effect  of  habit  is  known  to  every  one.  It  ren- 
ders any  operation  easy,  which  is  frequently  repeated. 
The  mind  and  the  muscles  become  adapted  to  a  partic- 
ular form  of  labor  ;  but,  if  that  form  of  labor  be  sus- 
pended, and  our  attention  be  directed  to  another,  it 
requires  a  considerable  time  before  we  can  acquire  a 
dili'erent  habit,  and,  in  the  mean  time,  the  good  effects 
of  the  })receding  habit,  are,  to  a  considerable  degree, 
lost.  Hence,  he  who  is  frequently  passing  from  one 
occupation  to  another,  is  in  the  condition  of  him  who  is, 
during  his  whole  life,  forming  habits  ;  and  never  in  the 
condition  of  him,  who  has  the  advantage  of  habits 
already  formed.  Besides,  this  long  habit  produces  in 
the  muscles  a  capacity  for  continued  exertion.  He  who 
is  in  the  habit  of  performing  an  operation,  can  perform 
t,  without  sensible  fatigue,  for  several  hours  together. 
K^ery  one  who  has  ever  sawed  wood,  or  used  a  spade 
7* 


78  DIVISION    OF    LABOR. 

in  a  garden,  is  sensible  of  this  fact.  Now,  all  this  ad- 
vantage is  lost,  by  frequently  turning  from  one  operation 
to  another. 

3.  Whsre  complicated  tools  are  to  be  used,  and  there 
is  no  division  of  labor,  much  time  is  also  lost  in  adjust- 
ing them  to  the  different  kinds  of  work.  By  division 
of  labor,  this  disadvantage  is  obviated.  Suppose  that 
nails,  of  different  sizes,  are  to  be  made,  and  it  is  neces- 
sary tnat  the  machinery,  in  order  to  adapt  it  to  the  dif* 
ferent  kinds  of  v.-ork,  should  be  frequently  adjusted  ;  the 
time  so  occupied  produces  nothing,  and  is  lost.  If,  on 
the  contrary,  one  machine  is  permanently  used  for  the 
manufacture  of  nails  of  one  particular  size,  all  this  loss 
is  avoided.  This  is  also  more  obvious,  when  the  ad- 
justment involves  expense  ;  as,  for  instance,  when  a  fur- 
nace is  used.  If  a  furnace  be  heated,  and  then  suffered 
to  cool  while  the  operator  is  performing  some  other  la- 
bor, the  fuel  consumed,  after  he  leaves  it,  and  that  which 
is  used  to  bring  it  again  to  the  requisite  temperature,  are 
a  total  loss,  in  addition  to  that  of  the  time  and  labor  re- 
quired in  kindling  the  fire,  and  in  waiting  for  the  rise  of 
temperature.  By  dividing  the  labor,  so  that  one  person 
shall  be  always  employed  at  the  furnace,  whilst  others 
are  employed  at  other  parts  of  the  process,  much  capi- 
tal and  labor  will  be  saved. 

4.  By  constantly  pursuing  the  same  occujjation,  a 
degree  of  skill  and  dexterity  is  acquired,  which  greatly 
increases  the  productiveness  of  human  labor.  This  ad- 
vantage is  lost,  by  employing  the  same  individual  upon 
several  operations.  Adam  Smith  informs  us,  that  a 
blacksmith,  who  occasionally  makes  nails,  but  whoso 
whole  business  is  not  that  of  a  nail-maker,  can  make  but 
from  eight  hundred  to  one  thousand  nails  a  day  ;  whilst 
a  lad,  who  has  never  exercised  any  other  trade,  can 
•■nake  upwards  of  twenty-three  hundred  a  day.  All  who 
have  been  accustomed  to  visit  manufactories,  n)ust  have 
been  surprised  to  observe  the  dexterity  which  is  ac- 
quired, even  by  children,  in  performing  the  operations 
in  which  ihey  are  exclusively  engaged.  It  is  ])robable 
that  the   perfonners  of  jugglery,  or  sleight-of-hand,  de- 


DIVISION    OF    LABOR.  70 

rive  their  skill  almost  eiilii-ely  from  tliis  cause.  Tiiey 
seldom  perform  more  than  a  few  o[)erations,  but  by 
practising  these,  and  these  alone,  for  a  great  length  of 
time,  they  at  last  attain  to  a  proficiency,  which,  to  a 
spectator,  is  incomprehensible. 

5.  Division  of  labor  suggests  the  contrivance  of  tools 
for  the  performance  of  the  operation  in  which  it  is  em- 
ployed. 

The  more  completely  any  process  is  analyzed,  the 
simpler  must  becoine  the  individual  operations  of  which 
it  is  composed  :  and  the  simpler  any  operation  is,  the 
easier  is  it  to  contrive  a  tool,  or  an  adjustment,  by  which 
it  may  be  performed.  Adam  Smith  informs  us,  that,  in 
the  first  steam  engines,  boys  were  constantly  employed 
to  open  a  communication  between  the  boiler  and  cylin- 
der, according  as  the  piston  ascended  or  descended. 
One  of  these  boys  observed,  that,  by  uniting  the  handle 
of  the  valve  which  opened  this  communication  with  an- 
other part  of  the  machine,  the  valve  would  open  and 
shut  without  his  assistance,  and  leave  him  at  liberty  to 
play  with  his  fellows.  One  of  the  most  important  im- 
jirovements  of  this  machine  was  thus,  by  division  of 
labor,  brought  within  the  capacity  of  a  playful  boy.  It 
would  have  been  very  diflicult  to  invent  machinery  for 
the  making  of  nails,  when  all  the  j)rocesses  were  con- 
sidered as  a  comi)licated  whole.  But  after  the  several 
operations  are  divided,  and  are  assigned  to  ii-lividuals 
separately,  it  becomes  comparatively  easy  to  construct 
an  adjustment,  by  wliich  any  one  of  them,  singly,  could 
be  performed.  This  is  liie  first  step  in  invention.  But 
this  is  not  all.  After  these  several  single  instruments 
have  been  invented,  the  next  step  is  to  combine  them 
together.  This  is  the  most  finished  effort  of  mechanical 
genius.  This  is  the  principal  difference  between  a  tool 
and  a  machine.  A  tool  performs  one  single  operation  , 
a  machine  combines  several  tools  together,  and  accom- 
plishes either  the  whole,  or  a  considerable  part,  of  a 
complicated  process. 

6.  Every  one,  at  all  acquainted  with  manufacturing 
employments,  must  have  observed,  that  some  of  the  op- 


80  DIVISION    OF    LA20R. 

erations  in  u  given  process,  require  greater  muscular 
power,  or  greater  skill,  or  greater  dexterity  than  others. 
Some,  for  instance,  can  be  performed  only  by  the  most 
experienced  workmen,  while  others  can  be  perfectly 
well  performed  by  children.  Now,  by  division  of  labor 
a  manufacturer  is  enabled  to  employ,  upon  each  opera- 
tion, precisely  the  labor  adapted  to  it,  and  is  obliged  to 
pay  for  each  portion  of  the  labor  no  more  than  it  is  ac- 
tu'illy  worth.  This  must  greatly  diminish  the  cost  of 
production.  Thus,  the  manufacture  iof  pins  is  divided 
into  ten  different  operations,  and  each  operation  employs 
one  laborer.  But  some  of  those  laborers  are  men  ; 
others  are  women  and  children  ;  and  their  wages  vary 
from  six  shillings  to  four  and  a  half  pence  sterling  a  day. 
If  the  labor  were  not  divided,  one  person  must  under- 
stand the  whole  process,  and,  therefore,  must  be  em- 
ployed at  the  highest  price  of  labor  ;  and  hence,  he 
must  be  paid  at  the  rate  of  six  shillings  a  day,  for  that 
part  of  the  work  which  is  worth  only  four  and  a  half 
pence  a  day.  Every  one  must  see  that  this  would 
greatly  increase  the  price  of  pins,  and  also  occasion  a 
great  deficiency  in  labor.  It  is  by  this  means,  also,  that 
occupation  is  provided  for  die  weak  and  the  aged,  for 
females  and  for  children,  who  would,  otherwise,  be  una- 
ble to  earn  any  thing.  Thus,  all  the  labor  of  the  com- 
munity is  rendered  productive,  and  an  immense  amount 
is  annually  added  to  the  revenue  of  a  country.  Nor  is 
the  gain  to  be  estimated  at  simply  what  is  thus  teamed. 
The  whole  community  is  thus  acquiring  those  habits  of 
industry  and  self-dependence,  which  are  essential  to  its 
happiness  and  well-being,  no  less  than  to  the  rapid  ac- 
cui  uilation  of  its  capital.* 

*  The  followiiiir  facts,  rospoctinix  llie  mnnufacture  of  watclies,  illu3» 
\T'dlo  very  f)rcil(ly  the  rxtont  to  which  the  division  of  labor  may  be 
carried,  and  also  the  amount  of  value  which  may  he  conferred  upon 
the  cheapest  substance  by  accumulated  and  hiirh  priced  labor:  — 

A  watgh  consists  of  W'2  pieces,  and  forty-three  trades  are  employed 
m  their  construction  ;  the  chain,  who.se  jenjith  is  eijrlit  inches,  has  ItiG 
links,  each  containinf^r  three  plates  and  two  {)ins.in  all  ^2")  pieces,  and 
passes  throuijh  fifteen  hands,  men.  wf)uien.  and  children,  of  throe 
uradert,  beifire  it  is  com|)lele  :  allowinir  them  five  hands  in  each  trade, 
il5  persons  fmd  employment  in  making  a  watch.    This  extensive  and 


DIVISION    OF    LABOR.  81 

Nor  are  the  benefits  of  the  division  of  labor  confined 
to  mechanical  processes.  The  results  have  been  e(jii;illy 
interesting,  in  those  cases  where  this  principle  has  been' 
apj)lied  to  intellectual  labor.  The  efiect  of  such  a  di- 
vision is  seen  in  the  following  account,  which  I  intro- 
duce here,  not  only  because  it  very  happily  illustrates 
ibis  whole  subject,  but  also  because  it  may  suggest  to 
scivMitific  men,  some  other  cases  in  which  it  may  be 
again  applied  with  siiiiilar  benefit. 

During  the  period  of  the  French  revolution,  the  gov- 
ernment was  desirous  of  producing  a  series  of  mathe- 
matical tables,  in  order  to  facilitate  the  extension  of  the 
decimal  system,  whicii  had  been  recently  adopted 
They  directed  their  mathematicians  to  construct  such 
tables  on  the  most  extensive  scale.  The  superintend- 
ence of  the  work  was  confided  to  M.  Prony.  It  haj)- 
pened  that  shortly  after  he  had  undertaken  it,  lie  opened, 
in  a  bookstore,  Adam  Smith's  "  Wealth  of  Nations," 
and,  by  accident,  turned  to  the  chapter  on  division  of 
labor.  The  thought  immediately  suggested  itself,  that 
this  might  be  adopted  in  the  work  in  which  he  was  en- 
gaged. He  immediately  followed  out  the  suggestion, 
and  arranged  his  plan  accordingly.  He  divided  the 
persons  who  were  to  execute  the  labor  into  three 
sections  : 

The  first  section  was  composed  of  five  or  six  of  the 
most  eminent  mathematicians  of  France.  Their  duty 
was  to  ascertain  the  analytical  expressions  which  were 
most  readily  adapted  to  simple  numerical  calculation,  and 
which  could  be  performed  by  many  individuals  employed 
at  the  same  time.  The  formuhe  on  the  use  of  which  it 
had  decided,  were  to  be  delivered  to  the  second  section. 

miinerous  individuality  will  aj»ply,  more  or  less,  to  every  inanufic- 
tured  article  in  every  day  use  ;  but  no  branch  of  manufactures  will 
afford  such  an  illustration  of  the  value  of  labor.  The  iron  of  w'lich 
the  balancc-spritiir  is  formed  is  valued  at  somethiiiff  less  than  a  Ihr- 
thiug  ;  this  {iroduces  an  ounce  of  steel,  worth 'l^*/.,  wiiich  is  drawn 
mto  2.^2'tO  yards  of  spring  wire,  and  represents  in  tlie  market  £,  i:?  -is  : 
but  still  another  process  of  haidenintr  this  orijrinally  farthing's  worth 
of  iron  renders  it  workable  into  7,ti50  balance-s|)rin(Ts,  whicli  wih 
realize,  at  the  common  pnos  of  25.  6d.  ea.ih,  £t)4G  5s.  tne  efiect  of  la 
bor  u'one. 


82  LIVISION    OF     LABOR. 

The  second  section  consisted  of  seven  or  eight  per- 
^sons,  of  considerable  acquaintance  with  mathematics, 
"whose  duly  it  was,  to  convert  into  numbers  the  formulae 
put  into  their  hands  by  the  first  section  ;  and  then  to 
deliver  out  these  numbers  to  the  members  of  the  third 
section,  and  to  receive  from  them  the  finished  calcula- 
tions. These  they  could  verify  without  repeating  the 
work. 

The  third  section  consisted  of  sixty  or  eighty  persons. 
They  received  the  numbers  from  the  second  section, 
and,  using  nothing  more  than  addition  and  subtraction, 
returned  to  that  section  the  finished  tables.  Nine- 
tenths  of  this  class  had  no  knowledge  of  arithmetic  be- 
yond its  first  two  rules  ;  and  it  is  remarkable  that  these 
were  usually  found  more  correct  in  their  calculations, 
than  those  who  possessed  a  more  extensive  knowledge 
of  the  subject.  The  extent  of  the  labor,  which  was 
thus  executed  in  a  remarkably  short  space  of  time,  may 
be  estimated,  when  it  is  stated  lliat  the  tables  thus 
formed  are  computed  to  occupy  seventeen  large  folio 
volumes.  And  yet  we  see  that  the  greatest  part  of  the 
labor  was  actually  accomplished  by  persons  who  might 
be  employed  at  very  small  expense,  and  who  could  do 
the  work  assigned  them,  as  perfectly  as  those  whose 
labor  was  the  most  expensive.* 

We  thus  see  the  manner  in  which  the  productiveness 
of  human  labor  may  be  increased.  1st.  By  discover- 
ing the  various  agents  of  nature  which  God  has  created 
for  our  benefit;  2d,  By  applying  these  agents  to  the 
service  of  man;  3d.  By  so  arrangmg  and  adjusting  bu- 
man  industry,  that  the  labor  necessary  to  be  emplo}ed, 
may  operate  with  the  greatest  possible  advantage.  In 
one  or  other  of  these  methods,  must  every  improvement 
ii:  tlie  physical  condition  of  mankind  operate.  And 
civilization  advances  just  in  proportion  as  all  of  them 
combined  are  brought  to  bear  ui)on  the  work  of  produc- 
tion ;  that  is,  of  creation  of  objects  of  desire,  in  other- 
words,  of  means  for  human  happiness. 

•  Babbage  on  Econom7  of  Machinery. 


LIMITATIONS    TO    DIVISION    OF    LABOR.  83 


SECTION  III. 

LIMITATIONS     TO      THE      DIVISION      OF      LABOR,      BOTH 
INDIVIDUAL    AND    NATIONAL 

We  now  proceed  to  anotlier  branch  of  the  subject  ; 
the  Limitations  of  the  Divisions  of  Labor.  These 
may  be  considered  in  reference  to  individuals,  and  to 
nations.  In  so  far  as  the  individual  is  concerned, 
tliese  hmitations  arise  from  three  causes.  1st.  The 
.JWUure  of  the  process;  2d.  Deficiency  of  Capital; 
and  3d.   Demand. 

\.  From  the  nature  of  the  Process.  Every  process 
can  be  analyzed  into  its  ultimate  elements  ;  that  is,  into 
the  various  simple  processes  of  which  it  is  composed. 
Thus  in  pin-making  the  straightening  of  the  wire  is  one 
operation,  the  cutting  it  into  equal  lengths  is  another, 
the  sharpening  of  the  points  is  another,  the  heading  of 
the  })in  is  anoiher,  &c.  But  when  we  have  reduced  the 
operation  to  its  simple  elements,  we  can  proceed  no 
further.  Hence,  here  is  our  necessary  limit  ;  for  it  is 
no  division  of  labor  to  employ  two  men  to  perform  pre- 
cisely the  same  operation.  Hence  an  establishment, 
which  carries  division  to  this  limit,  will  be  able,  from 
what  has  been  said,  to  undersell  another  which  does 
not  carry  it  to  the  same  degree  of  perfection.  And 
hence,  in  establishing  a  maiiu(\ictory,  it  is  important  so 
to  adjust  the  number  and  kind  of  workmen,  that,  when 
the  different  operations  of  a  i)rocess  have  been  assigned 
to  different  persons,  these  persons  may  be  in  such  pro- 
portions as  exactly  and  fully  to  employ  each  other. 
The  more  perfectly  this  is  accomplished,  the  greater 
will  be  the  economy.  And,  this  having  been  once  as- 
certained, it  is  also  evident  that  the  establishment  cannot 
be  successfully  enlarged,  unless  it  employ  multiples  of 
this  number  of  workmen. 

2.  Division  of  labor  may  be  limited  by  deficiency  of 
Capital.      Division   of    labor,   in   niimufnclures,    cannot 


84  LIMITATIONS    TO     DIVISION    OF    LABOR. 

be  caified  on,  unless  the  proprietor  have  sufficient  capi- 
tal to  employ,  at  the  same  time,  all  the  persons  neces- 
sary to  such  a  division,  and  to  keep  them  so  employed, 
until  the  proceeds  of  their  vvoik  enable  him  to  furnish 
ihein  again  witli  fresh  material.  This  is,  of  course,  a 
considerable  outla}',  and  supposes  a  considerable  accum- 
ulation of  the  proceeds  of  pre-exerted  industry.  Hence, 
in  a  poor  or  in  a  new  country,  there  can  be  but  little 
division  of  labor.  No  one  has  more  than  enough  capi- 
tal to  employ  himself,  and,  perhaps,  one  or  t\\o  labor- 
ers ;  and  hence,  each  individual  performs  all  the  opera- 
tions of  each  process,  and  frequently  those  of  several 
processes.  The  same  individual  is  the  farrier,  black- 
smith, cutler,  and,  perhaps,  wheelwright,  for  a  whole 
settlement.  To  illustrate  this  by  a  single  instance  :  If 
a  nailer  be  able  to  purchase  no  larger  amount  of  iron 
and  coal  than  he  can  use  in  the  manufacture  of  nails  in 
a  day,  he  must  perform  all  the  parts  of  the  process  him- 
self ;  and,  of  course,  must  labor  very  disadvantageously. 
As  soon,  however,  as  he  is  able  to  double  his  capital, 
he  may  employ  another  person  to  work  with  him,  and 
they  may  then  introduce  a  division  of  labor.  When  he 
has  tripled  his  capital,  he  may  employ  another  vvoikman, 
and  carry  his  division  still  further.  He  may  thus  go  on 
imtil  he  has  reduced  the  process  to  its  simplest  elenieuts. 
When  he  has  gone  thus  far,  the  accumulation  of  his 
annual  capital  will  enable  him  to  invest  something  in 
fixed  capital.  He  will  thus  be  able  to  purchase  some 
of  the  simpler  machines,  by  which  some  of  the  parts  oi 
his  jirocess  may  be  executed.  To  these  he  will  add 
others,  as  he  advances  in  vvealih,  until  his  accimuilated 
means  enable  hin:  to  combine  them  into  one  maciiine, 
for  completing  the  whole  process.  Thus  he  becomes 
a  manufacturer,  and  derives  the  larger  part  of  his  rev- 
enue, from  the  use  of  his  fixed  capital.  At  every  step 
his  gains  will  be  greater,  and  at  the  same  time  the  price 
of  his  product  will  become  less.  Tt  is  not  pretended 
that  all  these  changes  always,  or  frecpiently,  take  [)lace 
within  the  lifetime  of  a  single  individual.  'J'he  pro- 
gress  of  society  is   not  generally   so   rapid.     Yet  they 


LIMITATIONS    TO    DIVISION    OF    LABOR.  85 

sometimes  occur  in  the  manner  which  I  have  stated.  1 
give  the  ilhistration,  to  show  tii(3  tendency  of  things, 
and  the  power  of  accumulated  capital.  But,  whether 
the  results  are  comprised  in  the  lifetime  of  one,  two,  or 
three  individuals,  the  principle  is  the  same. 

3.  Division  of  labor  may  be  limited  by  the  demand 
for  the  article  produced.  Suppose  that,  in  a  given  dis- 
trict, there  is  a  demand  for  one  hundred  pomids  of  nails 
per  day,  and  that  these  can  be  made  by  two  men.  If 
three  men  could,  by  division  of  labor,  make  two  hun- 
dred pounds  per  day,  there  would  be  but  small  gain, 
either  to  the  workmen  or  to  the  public  ;  because  these 
men  would,  of  course,  lie  idle  half  of  the  time,  and  for 
this  time  they  must  be  paid,  as  well  as  for  the  time  in 
which  they  were  employed.  Or,  if  they  did  not  lie 
absolutely  idle,  that  portion  of  their  time,  which  was 
employed  on  other  labor,  would  be  of  comparatively 
small  value  ;  and  they,  by  attending  to  other  business, 
would  lose  the  skill  which  complete  division  of  labor 
confers  ;  and  which  is  one  of  its  principal  benefits.  Tiie 
case  is  still  stronger,  if  we  take  into  view  the  fac\,  that 
division  of  labor  supposes  a  large  investment  of  fixed 
capital,  and  that  those  w'ho  are  educated  to  any  mani.fiic- 
turiiig  business,  can  rarely  employ  themselves  upon  any 
thing  else.  If  the  laborers  at  any  of  our  manufactories 
were  employed  only  half  the  time,  their  wages  must  be 
doubled  ;  for  their  families  must  be  supported,  one  day 
as  well  as  another,  and  thus  the  interest  of  the  whole 
investment  must  be  charged  upon  half  the  quantity  of 
product.  These  causes,  together  with  the  loss  of  skill 
in  workmen,  would  more  than  double  the  price  of  prod- 
ucts, and  would,  of  necessity,  carry  back  the  division 
of  labor  to  its  less  perfect  state. 

But  this  demand  must  depend  upon  s.everal  circum- 
stances.     The  most  important  of  these  are  the  following  : 

1.  The  number  of  the  consumers.  When  the  nuinbe' 
of  inhabitants  is  small,  as  in  a  newly  settled  country,  or 
in  an  isolated  situation,  the  demand  must,  of  coiu'se, 
correspond  to  their  number.  One  hundred  men  will  re- 
quire but  jne   tenth  as  many  hats  or  shoes  as  one  thou- 


86  LIMITATIO'S    TO    DIVISION     OF    LABOR.   ' 

sand  men.  It  is  on  this  account  that  wealth  accumulates 
most  rapidly  on  navigable  waters,  because  the  market  of 
the  producers  is  not  limited  to  themselves,  but  may  be 
easily  extended  to  other  places. 

2.  By  the  weallh  of  the  inhabitants.  Demand  docs 
not  signify  simple  desire  for  an  article,  but  desire  for  it, 
combined  with  the  ability  and  loillingness  to  give  for  it 
what  will  remunerate  the  producer.  Hence,  tlie  greater 
the  ability,  in  a  given  population,  to  remunerate  the  pro- 
ducer, the  greater  will  be  the  demand.  The  demand 
for  hats,  in  a  population  of  one  thousand  men,  would  be 
limited  to  those  persons  in  that  population  who  were  able 
to  buy  a  hat.  The  larger  the  proportion  of  such  indi- 
viduals, the  better  it  would  be  for  the  hatter,  and  for 
every  other  producer.  Hence  we  see,  that  every  indi- 
vidual is  interested  in  the  prosperity  of  every  other  indi- 
vidual in  the  community. 

3.  By  the  cost  of  the  article.  The  greater  the  cost 
of  the  product,  the  smaller  will  be  the  number  of  per- 
sons who  are  able  to  purchase  it.  Hence,  the  less  will 
be  the  demand  ;  and  hence,  also,  the  less  opportunity 
will  there  be  for  division  of  labor.  And,  besides,  the 
greater  the  cost  of  the  article,  the  greater  amount  of 
capital  is  required  in  order  to  produce  it  by  division  of 
labor.  Hence,  this  cause  operates  in  two  ways  to  pre- 
vent the  employment  of  this  means  of  effecting  the  re- 
duction of  price.  Thus,  if  a  community  consist  of  one 
thousand  men,  and  of  these,  one  hundred  be  worth  one 
thousand  dollars  per  year  ;  four  hundred  be  worth  five 
hundred  dollars  ;  and  the  remainder  be  worth  but  two 
hundred  and  fifty  dollars  per  year  ;  and  an  article  be 
produced  within  the  reach  of  only  the  first  of  these  class- 
es, it  can  have  but  one  hundred  purchasers  ;■  if  it  come 
within  the  reach  of  the  second  class,  it  vvill  have  five 
hundred  ;  and  if  it  come  within  the  reach  of  the  third 
class,  It  will  have  one  thousand  purchasers.  Hence  it 
is,  that  division  of  labor  is  but  sparingly  used  in  the 
manufacture  of  rich  jewelry,  and  in  articles  of  expensive 
luxury  ;  while  it  is  so  universally  used  in  the  ])roduction 
of  all  articles  of  common  use.     Hence  we  see,  that  the 


LIMITATIONS    TO    DIVISION    OF    LABOR.  87 

benefits  of  the  use  of  natural  agents  and  of  division  of 
labor,  are  vastly  greater  and  more  important  to  the  mid- 
dling and  lower  classes,  than  to  the  rich.  'I'hese  means 
of  increased  production,  reduce  the  cost  of  the  neces- 
saries and  of  the  essential  conveniences  of  life  to  the 
lowest  rate,  and,  of  course,  bring  ihem,  as  far  as  possi- 
ble, within  the  reach  of  all. 

4.  By  facilities  of  transportation.  This  is  evident, 
from  what  has  been  said.  The  cost  of  an  article  de- 
pends not  only  on  the  cost  of  its  original  production, 
but  also  upon  the  cost  necessary  to  bring  it  to  the  con- 
sumer. Coal  may  be  very  cheap  at  a  coal  mine,  but  if 
it  must  be  borne  on  the  shoulders  of  men  to  the  consu- 
mer, it  would,  at  a  few  miles  from  the  mine,  become  so 
dear,  that  no  one  would  be  able  to  use  it.  •  The  demand 
would  be  so  small,  that  there  would  be  no  profit  either  in 
investing  capital  in  the  machinery,  or  in  emi)loying  di- 
vision of  labor  to  raise  it  from  the  mine.  But  if  horses 
be  used  to  transport  it  t©  the  consumer,  the  demand 
will  increase.  Again,  if,  for  horses,  canals  and  railroads 
be  substituted,  it  will  become  cheap,  and  the  demand 
will  increase  still  more  ;  and,  with  every  such  improve- 
ment, that  circle  of  consumption  expands,  of  which  the 
mine  is  the  centre.  The  same  princi})le  applies  to  man- 
ufactures, sjjociaily  those  of  iron  or  heavy  ware,  and  it 
applies  just  in  proportion  as  transportation  forms  a  large 
or  small  part  of  the  cost  to  the  consumer.  And  thus, 
in  general,  we  see  the  principle  on  which  facilities  for 
internal  communication  improve  the  condition  of  both 
the  other  branches  of  industry.  For  this  reason,  the 
price  of  land  and  grain,  rises  in  a  district  through  which 
a  canal  or  a  railroad  passes  ;  and,  for  the  same  reason, 
manufactories  may  at  one  time  be  successfully  established 
in  situations  where  they  at  another  lime  would  have  been 
useless,  if  not  ruinous  to  the  pioprietor.  And,  still  more 
generally,  we  see  the  manner  in  which  all  the  branches 
of  labor  assist  each  other.  A  railroad  or  a  canal  can 
never  profitably  be  constructed  in  a  country  where  there 
is  nothing  to  be  transported.  But  where  agriculture, 
manufactures,  and  commerce  are  productive,  and  hence 


88  DIVISION    OF    NATIONAL    LABOR. 

require  a  large  amount  of  transportation,  there,  these 
facihiies  are  immediately  in  demand.  Were  Liverpool 
and  Manchester  to  decline,  of  what  use  would  be  the 
railroad  between  them  ?  And,  on  the  other  hand,  the 
railroad  between  them,  by  reducing  the  cost  of  all  arti- 
cles bcuiglit  and  sold,  diminishes  the  cost  of  living  in 
both  places,  enables  the  producer  to  come  into  market 
with  greater  advantages,  increases  the  profit  in  all  kinds 
of  industry,  facilitates  the  accumulation  of  capital,  and 
thus  adds  greatly  to  the  annual  revenue  of  both  cities. 

II.  I  have  thus  far  considered  the  division  of  labor  as 
it  exists  among  the  inliabitants  of  the  same  place,  and  in 
the  same  situation.  The  same  principle,  however,  ap- 
plies to  people  of  dijjerent  districts.  Here  it  is  not 
merely  a  matter  of  choice,  but,  in  a  great  measure,  of 
necessity  ;  that  is,  it  is  required  by  the  very  conditions 
of  our  being. 

It  is  manifest,  that  the  different  portions  of  the  saine 
country  possess  different  facihties  for  producing  the  ob- 
jects-of  human  desire.  No  district  possesses  advantages 
for  producing  every  thing  ;  but  almost  every  dislrici 
possesses  peculiar  facilities  for  producing  something. 
Now,  natural  advantages  are  clearly  nothing  more  than 
means  of  increased  productiveness  of  labor  in  the  crea- 
tion of  any  particular  product.  If  one  soil  will  produce 
forty  bushels  of  wheat  to  the  acre,  with  the  same  labor 
that  another  will  produce  twenty,  the  labor  upon  the  first 
is  twice,  as  productive  as  that  upon  the  second  ;  that  is, 
the  owner  of  the  one  has  a  machine  by  which  he  can, 
with  the  same  labor,  produce  twice  as  much  as  his 
neighbor.  But  perhaps  the  soil  which  will  produce  only 
twenty  bushels  of  wheat,  will  produce  forty  bushels  of 
corn  per  acre,  while  the  other  soil  will  produce  only 
twenty.  This  second  soil  is,  therefore,  an  instrument 
which  gives  a  double  productiveness  to  labor  in  the  rais- 
ing of  corn.  Now,  it  is  manifest,  that  if  each  one  de- 
votes himself  to  the  production  of  that  for  which  nature 
has  given  him  j)eculiar  facilities,  his  amount  of  produc- 
tion will  be  greater,  he  will  hinself  be  richer,  and  the 
whole  community  will  be  supplied  at  a  diminished  cost. 


DIVISION    OF    NATIONAL    LABOR.  89 

Suppose  that  eacli  occiipietl  twenty  acres,  and  each  pro- 
duced the  crop  for  which  he  had  the  greater  advantages  ; 
•he  residt  would  be  20X40  =  800  of  wheat,  and  the 
same  of  corn  ;  =800  bushels  of  wheat  and  800  of  corn. 
Suppose,  again,  they  divided  their  crops,  and  each  ap- 
propriated ten  acres  to  wheat  and  ten  to  corn  ;  the  rcsidt 
would  be,  10X10  =  400  of  wheat,  and  10X20  =  200  of 
corn;  and  10X40  =  400  of  corn,  and  10X20  =  200  of 
wheat  ;  that  is  600  of  wheat  and  GOO  of  coin  ;  tJiat  is, 
there  would  be  600  instead  of  800  bushels  of  each 
raised,  and  the  loss  to  both,  and  to  the  community, 
would  bo  200  bushels  of  each  a  year.  By  so  much 
would  they  both  be  poorer  than  by  devoting  iliemselves 
wholly  to  that  pioduct  for  which  each  had  the  greatest 
natural  advantages. 

Or,  to  take  another  case!  Suppose  one  district  rich 
in  soil,  and  adapted  to  the  production  of  wheat,  but  level 
and  far  inland,  and,  theiefore,  unadapted,  by  position, 
ar.d  want  of  the  proper  natural  agents,  to  the  production 
of  manufactures  ;  and  another  district,  on  the  sea-board, 
hilly  and  sterile,  adapted  to  manufactures,  but  unadapted 
to  the  culture  of  wheat.  On  the  first,  with  one  day's 
labor,  a  man  may  raise  two  bushels  of  wheat,  but  could 
produce  but  four  yards  of  cloth.  On  the  other,  by  the 
same  labor,  a  man  can  produce  twelve  yards  of  cloth 
but  can  raise  but  one  bushel  of  wheat.  Now,  it  is  man- 
ifest, that  by  each  district's  devoting  its  labor  to  that 
kind  of  production,  for  which  it  has  the  greatest  natural 
facilities,  the  production  of  the  whole  country  will  be 
increased.  It  is  also  evident,  that  a  man  in  the  wheat 
district  will  provide  hims.elf  with  cloth  at  a  cheaper  rale, 
by  raising  wheat,  and  procuring  cloth  by  exchange,  than 
by  manufacturing  it  himself;  and  on  the  oilier  hand,  that 
the  manufacturer  will  provide  himself  with  wheat,  at  a 
much  cheaper  rate,  by  making  cloth,  than  by  raising 
vvlieat  himself.  Thus,  by  this  form  of  division  of  labor, 
the  productive  power  of  both  is  increased  ;  their  desires 
are  gratified  at  the  expense  of  less  labor  ;  and  thus,  both 
are  rendered  richer  and  happier. 

Ail  this  «:eem;   obvio'js,  if  only  the  several  districts 
8* 


90  DIVISION    05    NATIONAL    LABOR. 

of  the  same  country  be  compared.  And  it  is  obvious, 
becaus*^  every  one  perceives  that  God  has  bestowed  upon 
different  districts,  of  the  same  country,  different  advan- 
tages, which  it  is  for  the  interest  of  that  country  that 
each  district  should  improve  to  the  utmost.  But  every 
one  may  see,  that  the  same  princi})]es  apply  to  difierent 
nations  inhabiting  the  diti'erent  quarters  of  tlie  globe. 
The  separation  of  the  earth  into  warring  nations,  is  noth- 
ing but  the  arbitrary  work  of  man  ;  it  alters  neither  the 
qualities  nor  the  relations  which  God  has  given  to  things, 
nor  the  laws  under  which  he  has  constituted  man.  If  a 
man  own  a  farm,  of  which  one  part  is  suited  only  to 
tillage,  and  another  part  only  to  grazing,  and  he  divide 
it,  and  sell  the  pasture  land  to  his  neighbor  ;  this  does 
not  alter  the  nature  of  the  soil.  Will  it  not  be  just  as 
profitable  to  appropriate  each  part  to  the  purpose  for 
which  God  designed  it,  after  the  purchase,  as  before  ? 

Every  man  needs,  for  the  gratification  of  his  innocent 
desires,  nay,  for  his  conveniences  and  even  necessaries, 
the  productions  of  every  part  of  the  globe.  To  be 
convinced  of  this,  we  have  only  to  enumerate  the  arti- 
cles which  furnish  our  houses,  the  food  that  covers  our 
tables,  and  the  raiment  which  clothes  our  bodies.  How 
greatly  would  all  our  means  of  happiness  be  diminished, 
were  we  deprived  of  the  iron,  the  furs,  and  the  hemp  of 
the  North  ;  the  coffee,  teas,  sugar,  rice,  fruits,  and  spi- 
ces of  the  South  ;  or  the  wool,  the  wheat,  and  the  man- 
ufactures, of  temperate  climates.  Every  one  must  be 
convinced  that  the  happiness  of  every  man  is  increased 
in  proportion  as  he  is  furnished  with  the  greatest  number 
of  these  objects  of  desire  ;  and  furnished  with  them,  in 
their  greatest  perfection,  and  at  the  cheapest  rate. 

But,  it  is  evidently  the  will  of  our  Creator,  that  but 
few  of  these  objects,  every  one  of  which  is  necessary 
to  the  happiness  of  every  individual,  should  be  produced 
except  in  particular  districts.  Others,  if  they  can  be 
produced  in  several  places,  can  be  ])roduced  much  more 
cheaply,  and  in  greater  perfection,  in  some  places,  than 
in  olluns.  livery  jiart  of  the  glol)e  j)ossesses  peculiar 
advantages  for  the  j)rc)(luction  of  something  ;  but  no  part 


DIVISION    OF    NATIONAL    LABOR.  91 

possesses  advantages  for  the  produciion  of  every  tiling, 
llence,  we  see,  on  tlie  principle  illuitraied  above,  that 
the  annual  production  of  the  ghjbe  will  be  greatest  ;  that 
is,  there  will  be  the  largest  amount  falling  annually  to 
the  share  of  every  individual  ;  that  is,  every  individua 
will  be  richer  and  happier,  when  each  portion  of  the 
globe  devotes  itself  to  the  creation  of  those  products  for 
which  it  has  the  greatest  natural  facilities.  U  a  man  in 
New  York  can  produce,  by  one  day's  labor,  one  hun- 
dred pounds  of  Hour,  but  could  not  produce  more  than 
one  ounce  of  colfee  ;  and  a  man  in  Cuba  can  produce 
twenty-five  pounds  of  coffee,  but  cannot  produce  more 
than  one  pound  of  flour,  and  they  exchange,  as  we  have 
befort>  seen  they  must  exchange,  labor  for  labor  :  the 
one  will  produce,  by  a  day's  labor,  twenty-five  pounds 
of  coffee,  instead  of  an  ounce  ;  and  the  other,  one  hun- 
dred pounds  of  flour,  instead  of  a  pound.  Is  not  this 
better  than  for  the  New  York  farmer  to  raise  his  coffee 
in  a  hot-house,  at  the  expense  of  a  day's  labor  for  an 
ounce  ;  and  the  West  Indian  to  raise  Iiis  wheat  on  the 
mountains,  at  the  expense  of  a  day's  labor  for  a  pound. 
•  Such  are  the  advantages  of  that  division  of  labor  sug- 
gested by  geographical  position. 

And  the  final  cause  of  all  this  is  evident.  God  in- 
tended that  men  should  live  together  in  friendship  and 
harmony.  By  thus  multi|)lying  indefinitely  their  wants, 
and  creating  only  in  particular  localities,  the  objects  by 
which  those  wants  can  be  supplied,  he  intended  to  make 
them  all  necessary  to  each  other  ;  and  thus  to  render  it 
no  less  the  interest,  than  the  duty  of  every  one,  to  live 
in  amity  with  all  the  rest. 

Nor  is  the  application  of  this  principle  confined  to 
geographical  localities.  The  simple  fact  that  a  nation 
possesses  facilities,  be  they  either  natural  or  acquired, 
for  creating  any  product  at  a  cheaper  rate  than  any 
other  nation,  is  a  reason  why  hat  nation  shoidd  devote 
itself  to  the  creation  of  that  product  ;  and  why  another 
nation  should,  for  the  same  reason,  improve  its  own 
peculiar  advantages.  Thus,  there  are  certain  states  of 
society,  and  a  certain  amount  of  accumulation  of  cap- 


92  DIVISIOIN     OF.  NATIONAL    LABOR. 

ital,  most  favorable  lo  the  creation  of  certain  products. 
A  nation  in  this  state,  and  with  this  accumulation,  can 
furnish  these  products  cheaper  than  her  neighbors;  and 
this  is  a  reason  they  should  purchase  them  of  her. 
Could  not  one  of  our  old  States  supply  one  of  the  new 
States  with  manufactures,  cheaper  than  the  new  State 
could  produce  them  itself  ?  And  is  not  this  a  reason 
why  the  new  State  should  procure  them  by  exchange, 
rather  than  by  direct  production  ?  Is  it  not  cheaper  for 
an  Indian  ^.o  buy  a  rifle  of  an  European,  than  to  attempt 
to  make  one  for  himself? 

This  is,  however,  by  no  means  to  assert  that  such 
arrangements  and  relations  are  to  be  permanent.  As 
a  country  accumulates  fixed  capital,  it  creates  its  own 
facilities  for  creating  almost  every  kind  of  manufactured 
product.  One  nation  will  naturally  begin  to  do  this  at 
the  same  point  of  accumulation  at  which  another  began 
lo  do  it.  And  the  way  in  which  to  arrive  at  this  point 
the  soonest,  is  to  become  rich  as  fast  as  possible  ;  that 
is,  to  buy  as  cheap  as  we  can,  or,  in  other  words,  to 
procure,  annually,  as  many  objects  of  desire  as  possible, 
for  a  given  amount  of  labor.  A  tribe  of  Indians  would 
much  sooner  be  able  to  make  rifles  for  itself,  by  pur- 
chasing, at  first,  rifles  of  an  European,  than  by  deter- 
mining that  it  would  never  use  rifles,  until  it  could  man- 
ufacture them  for  itself.  As  the  use  of  a  rifle  would 
render  industry  more  productive,  and  thus  render  the 
tribe  richer,  it  would  bring  them  one  step  nearer  to  thai 
degree  of  accumulation,  at  which  they  might  begin  to 
make  rifles  for  themselves.  But  the  resolution  not  to 
purchase  of  others,  would  have  no  such  tendency,  inas- 
much as  it  would  do  nothing  whatever  towards  accum- 
ulating production  ;  but  would,  on  the  contrary,  shut 
them  out  from  the  very  means  oflercd  them  for  most 
rapidly  benefiting  their  condition. 

To  sum  up  what  has  been  said.  It  will  be  seen  that 
production  will  be  increased  ;  that  is,  men  will  be 
richer,  and  therefore  may  be  happier,  as  the  following 
conditions  are  com|ilie(l  with  : 

1.  As  the  laws  of  nature,  designed  by  our  Creator 
^or  our  b'j.ncfii,  are  understood  ; 


EFFECTS    OF    INCREASED    I'KODUCTITLW  ESS.       93 

2.  As  the  ineans  are  devised  for  availing  ourselves, 
in  the  most  successful  manner,  of  the  utility  of  these 
laws  ; 

3.  As  the  human  labor  necessary  to  be  expended,  is 
SO  arranged  as,  with  a  given  expenditure,  to  produce  the 
greatest  and  most  perfect  result  ;  and 

4.  As  the  inhabitants  of  tiie  earth,  in  difTerent  locali- 
ties, devote  themselves  most  exclusively  to  the  produc- 
tion of  those  objects  of  desire,  for  the  production  of 
which  they  have  received,  either  directly  or  indirectly, 
from  their  Creator,  the  greatest  facilities. 

Or,  still  more  generally,  production  will  be  abundant  ; 
that  is,  man  will  enjoy  liie  means  of  physical  happiness, 
in  proportion  to  his  individual  industry,  both  of  body 
and  mind  ;  and  to  the  degree  of  harmony  and  good 
feeling  which  exists  between  the  individuals  of  the  same 
society  ;  and  also  between  the  difierent  societies  them- 
selves. *^.^^<f  .^. 


l^  L^  c  r^ 


C^.c 


4^    ^' 


SECTION  IV. 


/ 

EFFECTS     OF    THE     INCREASED     PRODtfCTI  VENESS     OP 
HUMAN    INDUSTRY. 

This  subject  has  been  already  so  frequently  alluded 
to,  and  all  the  points  on  which  it  depends,  so  distinctly 
stated,  that  it  will  not  be  necessary  to  examine  it  so 
fully,  as  might  otherwise  be  required. 

The  result  of  industnj  a|)|ilied  to  capital  is  product^ 
value,  or  the  means  of  gratijijing  human  desire.  The 
result  of  increased  productiveness  of  human  industry,  is, 
with  the  same  labor,  increased  product,  value,  or  means 
of  gratifying  human  desire.  That  is,  in  general,  in- 
creased productiveness  is  ecpjivalent  to  increased  means 
of  human  happiness.  This  simple  statement  would 
seem  sufficient  to  explain  the  whole  subject.     In  order, 


94       EFFECTS    OF    INCREASED     PRODUCTIVENESS. 

however,  to  obviate  any  objections  that  may  arise,  we 
will  proceed  to  show  its  practical  operation,  by  several 
illustrations. 

Take  the  case  of  a  single  individual.  Suppose  a 
man,  by  the  same  amount  of  labor  that  he  spent  last 
year,  to  be  able  this  year  to  create  twice  as  much  value. 
Su|)pose  that  a  farmer  has  twice  as  large  a  harvest ; 
that  is,  that  his  instrument  is  twice  as  good  this  year  as 
it  was  last  year.  The  result  is,  he  will  be  able  to 
satisfy  the  desire  which  that  product  gratifies,  twice  as 
abundantly  as  he  did  last  year.  He  will  have  more  to 
exchange  with  other  producers,  and  hence  he  will  be 
able  to  gratify  other  desires  more  abundantly.  He  will 
be  able  to  make  exchanges  which  were  before  out  of  his 
power  ;  hence,  he  will  be  able  to  add  to  his  mode  of 
living,  new  means  of  happiness.  And,  on  the  other 
hand,  as  he  is  able  to  make  exchanges  with  others  with 
whom  it  was  before  impossible,  others,  in  return,  are 
able  to  avail  themselves  of  his  product  or  means  of  hap- 
piness, who  were  before  unable  to  do  so.  Hence,  he 
is  not  only  happier  himself;  but  the  very  means,  by 
which  he  becomes  so,  render  him  the  instrument  of 
greater  happiness  to  others.  Hence,  it  is  a  benefit  to  a 
whole  neighborhood,  for  a  single  member  of  it  honestly 
to  become  rich.  In  other  words,  increased  productive- 
ness, in  one  branch  of  labor,  increases  productiveness 
in  every  branch  of  labor. 

Let  us  call  this  first  individual  A,  and  suppose  that 
before  the  productiveness  of  his  labor  had  been  in- 
creased, he  exchanged  with  another  individual,  B  ,  on 
equal  terms.  If  the  labor  of  A  and  B  were  10  per 
day,  they  would  exchange  with  each  other  at  the  rate  of 
10  for  10.  13ut,  suppose  now,  that  by  some  new  in- 
vention, A's  labor  produced  20  per  day.  He  would 
oiler  to  exchange  on  the  same  terms  as  before,  but  he 
would  offer  20,  and  expect  from  B,  20  in  return.  But, 
in  consecjuence  of  the  inferior  productiveness  of  B's 
labor,  ho  would  not  bo  able  to  piu'chase  so  much  ;  he 
could  afford  to  buy  only  10,  as  before.  A,  therefore, 
in   order   to  induce   him  to  exchange,   that   is,  to  buy 


EFFECTS    OF    INCREASED    PRODUCTIVENESS.        95 

would  abate  his  price  ;  that  is,  would  offer  to  exrliange 
on  better  terms,  and  would  olier  him  at  the  rate  of  20 
for  15,  or  in  some  such  proportion.  What  B  would  not 
|)urchase  at  the  rate  of  10  for  10,  he  might  be  willing  to 
purchase  at  the  rate  of  15  for  20.  Thus,  we  see,  thoy 
would,  in  this  case,  share  the  benefit  between  them. 
But  let  the  labor  of  B  now  be  increased  in  productive- 
ness, so  that  it  shall  be  equal  to  that  of  A  ;  that  is,  be 
also  at  the  rale  of  20  per  day.  They  will  now  exchange 
at  the  same  rate  as  before  ;  that  is,  at  the  rate  of  20  for 
20,  with  this  dillerence,  that  for  one  day's  labor,  they 
will  both  have  twice  as  many  objects  of  desire  as  be- 
fore, or  as  many  objects  of  desire,  with  half  a  day's  la- 
bor ;  that  is,  both  will  be  twice  as  ricli  as  before.  Thus, 
the  increased  productiveness  of  B,  is  now  a  benefit  to 
A,  inasmuch  as  he  now  receives  20  for  20,  when,  be- 
fore, he  only  received  15  for  20.  Now  it  needs  but  a 
little  reflection  to  perceive,  that  the  case  of  A  and  B, 
is  the  case  of  the  whole  community. 

But  the  case  is  made  still  stronger,  when  the  effect 
of  competition  is  taken  into  the  account.  Let  the  pro- 
ductiveness of  labor  in  any  department  be  ever  so  great, 
where  labor  and  capital  are  free,  competition  will  always 
reduce  profit  in  one  department  to  the  same  average  per 
cent,  that  it  affords  in  other  departments.  Hence,  let 
the  productiveness  of  labor  and  caj)ital,  in  any  one  mode 
of  employment,  be  ever  so  great ;  interest  and  wages, 
in  that  employment,  will  be  no  higher  than  they  are, 
other  things  being  equal,  in  other  employments.  That 
is,  while  the  capitalist  and  the  laborer  receive  the  same 
interest  and  wages  as  the  rest  of  the  community  ;  in  other 
words,  while  the  community  pay  no  more  for  this  capi- 
tal and  labor  than  they  pay  for  any  other,  they  receive  a 
greater  amount  of  value  in  exchange,,  and,  as  much 
more,  as  the  productiveness  of  that  labor  and  capital 
has  been  increased.  Thus,  capital  and  labor  in  the  cot- 
ton manufacture  is  not  belter  paid,  upon  an  average,  than 
tn  other  modes  of  investment  and  industry.  Jf  it  were, 
capital  and  labor  would  flow  into  it,  until  the  equilibrium 
was  restored.      But,  while  this  is  the  fact,  we  obtain  a 


96       EFFECTS    OF    INCREASED    PRODUCTIVENESS. 

yard  of  cotton  cloth  for  one  fourth  the  price,  or  at  one 
fourth  of  the  labor,  at  which  we  formerly  obtained  it  ; 
that  is,  we  receive  four  times  as  much  as  formerly,  in 
return  for  what  we  pay  for  the  cost  and  labor  of  making 
cotton  cloth.  And  thus,  over  the  whole  world,  every 
instance  of  increased  productiveness,  whether  it  be  from 
the  use  of  natural  agents,  or  from  tlie  division  of  labor, 
whether  in  our  own  country,  or  in  another  country,  if  we 
choose  to  avail  ourselves  of  it,  enables  every  man,  by 
paying  the  producer  the  same  as  before,  to  procure  a 
larger  amount  of  value  ;  that  is,  of  objects  for  the  grat- 
ification of  desire  ;  that  is,  enables  every  man  to  become 
both  richer  and  happier. 

The  above  remarks  will,  I  hope,  be  sufficient  to  il- 
lustrate the  general  principle.  As,  however,  there  are 
several  consequences  resulting  from  increased  produc- 
tiveness of  human  labor,  especially  from  the  use  and 
improvement  of  natural  agents,  which  seem  at  first  view 
to  be  at  variance  with  what  we  have  here  advanced,  it 
may  be  necessary  to  pursue  the  results  somewhat  n)ore 
minutely,  and  to  consider  tli^  objection  connnonly  made, 
that  the  use  of  labor-saving  machinery  is  prejudicial  to 
the  interests  of  the  laboring  classes. 

It  may,  however,  be  here  premised,  that  the  objection 
made  against  natural  agents,  is  not  to  their  «se,  but  to 
their  improvement.  Men  object  to  the  use  of  a  spinning 
jenny.,  but  not  to  the  use  of  a  spinning  wheel.  'I'liey 
dislike  a  rake  by  horse  power.,  but  do  not  dislike  a  rake. 
But  every  one  must  see,  that  this  sort  of  objection,  if  it 
be  founded  in  truth,  is  by  no  means  sufficiently  exten- 
sive. A  spinning  wheel.,  or  a  hand  loom,  or  a  hand 
rake,  is  a  labor-saving  machine  ;  and  it  involves  the  use 
of  natural  agents,  just  as  truly  as  a  spinning  jenney,  a 
power  loom,  or  a  horse  rake.  If  the  use  of  natural 
agents  be  injurious,  we  should  abandon  them  altogether, 
and  spin,  and  weave,  and  rake,  with  our  fingers.  But 
if  this  would  be  unwise,  and  it  be  conceded  that  we 
must  use  natural  agents,  in  some  form  or  other,  why  not 
use  the  best  that  we  can  procure  ;  that  is,  the  best  that 
Cod    has  given    us  .''      If,  as  all  must  allow,  the  use  of 


EFFECTS     OF    INCREASED    PRODUCTIVENESS.        97 

them,  up  to  a  certain  point,  has  conferred  an  incalcula- 
ble benefit,  what  reason  have  we  to  suppose,  that  oddi- 
tional  improvement  in  the  use  of  them  will  not  confer 
still  additional  benefit. 

But,  passing  this,  I  proceed  to  consider  the  effects  of 
increased  productiveness  of  labor,  both  upon  Producers 
and  Consumers. 

T.    The  effects  of  natural  agents  upon  Producers. 

These  are  either  immediate,  or  ultimate. 

1.  Immediate.  It  is  said  that  every  improvement  in 
machinery  enables  the  work  to  be  done  by  fewer  labor- 
ers, and  lience  many  persons  are  thrown  out  of  employ- 
ment ;  and  that  every  change  in  the  manner  of  labor, 
deprives  many  persons  of  tiie  use  of  that  skill,  wliich  is 
their  whole  means  of  subsistence. 

So  far  as  change  in  the  manner  of  labor  is  concerned, 
but  little  need  be  said,  as  this  is  but  a  temporary  incon- 
venience. If  a  new  kind  of  work  is  to  be  done,  some 
persons  must  learn  to  do  it,  and  must  be  paid  for  learn- 
ing. If  a  man  do  not  choose  to  learn  it,  although  he 
would  be  paid  for  learning  it,  and  be  supported  by  his 
labor,  after  he  has  learned  it,  it  is  his  own  fault.  He 
may  quarrel  with  his  own  obstinacy,  but  he  has  nothing 
else  to  blame.  Nor  is  the  simple  change  of  employ- 
ment a  peculiar  hardship.  Fe^v  men  pass  through  life, 
without,  at  some  time  or  other,  materially  modifying 
their  mode  of  employment,  from  choice,  instead  of  from 
necessity. 

The  main  difficulty,  therefore,  which  is  supposed  to 
result  from  the  use  of  improved  methods  of  production, 
IS,  that  they  employ  a  less  number  of  laborers  :  and, 
hence,  that  many  laborers  are  thrown  out  of  employ- 
incnt. 

In  reply  to  this  it  might  be  asked,  what  is  the  testi- 
mony of  facts,  in  this  case.  Improvements  in  machine 
ry  have  been  going  on,  ever  since  the  creation.  Has 
the  demand  for  labor  diminished  ?  Improvements  have 
been  made  in  particular  districts.  Have  the  laborers 
been,  by  these  means,  driven  away;  or,  on  the  contra 
9 


98       EFFECTS    OF    INCREASED    PRODUCTIVENESS. 

ry,  are  not  these   the  very  districts,   to  which  laborers 
inevitably  resort  for  employment  ? 

But,  aside  from  this,  let  us  examine  the  assertion,  that 
some  laborers  are  thrown  out  of  employment.  Let  us, 
how3ver,  first  endeavor  to  ascertain  how  great  the  evil  is. 

1 .  It  is  not  universal.  The  improved  mode  of  pro- 
duction always  requires  some  labor,  and,  of  course,  a 
portion  of  those  formerly  employed  must  still  fiud  em- 
ployment. To  these,  there  results  no  other  disadvan- 
tage, than  that  of  a  change  in  the  mode  of  employment; 
but  with  the  meliorating  circumstances  of  higher  wages 
and  less  fatiguing  labor. 

2.  It  is,  by  necessity,  gradual.  Improvements  in 
machinery  are  made  by  slow  degrees.  Although  the 
total  change  may  show  a  greatly  increased  productive- 
ness of  labor,  yet  no  one  single  change  is  often,  of  it- 
self, great  enough  to  produce  a  great  change  in  the  de- 
mand for  laborers.  Again  :  Let  the  change  be  ever  so 
great,  it  cannot  be  introduced  at  once,  over  a  whole  na- 
tion. Hence,  its  effects  will  be,  at  first,  to  reduce  the 
wages  of  those  engaged  in  the  former  methods  of  manu- 
facturing. The  consequence  will  be,  that  no  new  la- 
borers will  learn  the  trade.  This  will  tend  to  keep  up 
the  wages  of  those  who  remain  in  it.  And,  lastly  :  If 
a  new  instrument  is  to  be  employed,  tliere  must  be  an 
additional  number  of  men  employed  to  manufacture  it. 
This  will,  of  course,  require  an  additional  number  of 
laborers,  who  must  be  withdrawn  from  other  employ- 
ments. This  will  tend  to  raise  the  price  of  labor,  and, 
of  course,  either  to  furnish  employment  for  those  who 
wish  to  leave  the  fornrer  occupation,  or  else  to  keep  up 
tile  wages  of  those  who  choose  to  remain  in  it. 

3.  The  infelicity  here  spoken  of,  is  no  other  than  that 
which  belongs  to  the  tenure  of  all  property  whatsoever. 
Skill  and  labor,  as  well  as  capital,  are  always  liable,  in 
the  revolutions  of  society,  to  depreciate  in  value,  or  even 
to  become  worthless.  "  Riches  make  to  thrmselves 
wings,  and  flee  away."  The  wisdom  of  man,  since  the 
creation,  has  never  yet  discovered  any  link  strong  enough 
to  connect  a  human  being,  indissolubly,  with  any  sublu* 


EFFECTS  OF  INCREASED  PRODUCTIVENESS.    99 

nary  possession.  The  laborer,  therefore,  in  this  case, 
holds  his  property  precisely  as  any  other  man  holds  it, 
and  is  subject  to  no  peculiar  hardship. 

Let  us  however  proceed  to  consider  the  ultimate  ef- 
fects of  increased  productiveness  upon  producers. 

1.  The  producer  shares  with  the  rest  of  the  commu- 
nity in  liie  benefit  derived  from  increased  productiveness; 
that  rs,  if  he  earn  liie  same  wages  as  before,  he  is  richer ; 
and,  if  he  earn  less,  he  is  less  poor  than  he  would  have 
bijen,  if  no  such  change  had  taken  place.  That  is  to 
say,  money,  or,  in  other  words,  a  given  amount  of  labor, 
is  capable  of  procuring  for  him  a  greater  amount  of  ob- 
jects of  desire,  than  before. 

2.  From  this  iricreased  productiveness,  there  must  be, 
throughout  the  whole  community,  an  increased  demand 
Jor  labor.  Suppose  a  community  of  one  hundred  men 
to  accpiire,  by  their  labor  and  capital,  every  year,  just 
enough  to  support  themselves,  after  defraying  the  ex- 
penses of  their  several  establishments.  So  long  as  this 
state  of  tilings  continued,  there  would  be  no  increased 
demand  for  laboreis  ;  for  there  would  be  no  additional 
capital  with  which  to  maintain  then).  The  young  must 
therefore  emigrate,  or  else  there  will  be  a  competition 
among  laborers  for  work,  and  thus  wages  w  ill  fall.  But, 
suppose,  that  by  some  new  mode  of  increased  produc- 
tiveness, the  capital  be  increased  in  a  single  year,  twen- 
ty-five per  cent.,  there  will  then  be  a  demand  for  the  in- 
dustry of  a  greater  number,  say  twenty-five  additional 
laborc^rs  ;  since  this  additional  capital  can  produce  noth- 
ing, unless  it  be  united  with  labor.  If  there  be  not 
Iwenty-five  additional  laboreis  to  be  immediately  pro- 
cured, wages  must  rise,  because  there  will  be  a  compe- 
tition among  ca[)italists  for  labor  ;  and  children  and  per- 
sons, who  with  the  former  j)rices  could  earn  nothing, 
will  now  be  enijiloyed.  And,  if  the  demand  for  labor, 
arising  from  this  increase  of  capital,  could  not  be  thus 
sup|)lied,  those  engaged  in  less  profitable  employment  in 
other  districts,  and  other  countries,  would  come  in  to 
supply  the  deficiency.  Such  is  always  seen  .o  be  the 
fact.     Popu'ation  follows  capital.     It  goes  where  capi- 


100    EFFECTS    OF    INCREASjiD    PRODUCTIVENESS. 

tal  goes,  and  it  concentrates  where  capital  accumulates, 
and  it  retires  when  capital  retires.  And  hence,  in  a 
whole  country,  where  the  number  of  inhabitants  is  limit- 
ed, the  increase  of  capital  must  raise  the  rate  of  wages. 
And  hence,  by  just  so  much  as  increased  productive- 
ness of  labor  increases  the  amount  of  capital,  it  must 
also  tend  to  raise  the  price  of  labor  tiiroughout  a  whole 
country.  That  is  to  say,  the  obvious  ten'dency  of  the 
use  of  natural  agents  is,  to  increase  the  wages  of  labor- 
ers in  general. 

3.  But,  the  tendency  of  the  use  of  machinery  is  to 
increase  the  wages  of  laborers,  in  that  very  department 
of  industry,  in  which  they  are  employed.  The  reason 
for  this  is  obvious.  Reduction  of  price  prod  jces  an 
additional  demand,  more  than  suflicient  to  compensate 
for  the  diminished  amount  of  labor  necessary  for  the 
creation  of  the  particular  product.  That  this  must  al- 
ways be  the  case,  can,  I  think,  be  conclusively  fhow/j. 

Suppose  that  with  the  present  machinery,  one  hi  .idred 
men  are  able  to  manufacture  cotton  cloth  at  fif.y  cents 
per  yard,  and  that  tiie  amount  which  they  pri/tiuce  is 
precisely  sufficient  to  supply  the  wants  of  the  diyirict  for 
which  they  labor.  At  this  price,  no  consurr.ars,  but 
those  worth  one  thousand  dollars  per  year,  can  afford  to 
purchase  cotton  cloth,  and,  of  course,  the  denand  is 
limited  exclusively  to  them.  Suppose  now,  that  im- 
proved machinery  enables  fifty  men  to  manufacture  as 
large  an  amount  of  cotton  cloth  as  one  hundred  men 
could  manufacture  before,  and  the  consequence  is,  that 
cotton  cloth  is  sold  at  twenty-five  cents  per  yard.  It  is 
evident,  that  if  the  demand  be  precisely  doubled,  there 
will  be  wanted  just  as  many  laborers  as  before ;  so  that 
their  condition  will  be  in  no  manner  altered,  except  by 
change  of  labor  with  its  correspondent  advantages,  and 
the  gradual  rise  of  wages,  sj)oken  of  above.  And,  it 
is  also  evident,  that  every  degree  of  increase  of  demand, 
beyond  what  is  sufficient  to  produce  this  equiUbrium 
must  be  for  the  benefit  of  those  engaged  iti  this  sort  of 
labor. 

But  it  is  evident    for  several  reasons,  that  the  reduc- 


EFFECTS    OF    INCUF.ASF.D     PRODUCTIVENESS,    lol 

tion  of  price  one  half,  must  more  than  double  the  de- 
rnand  for  cotton  clolii.  Tlius,  wiieii  the  price  was  lifty 
cents  per  yard,  only  tliose  consumers  who  were  wojlli 
one  thousand  dollars  per  year,  could  purchase  cotton 
cloth ;  and  the  sale  was,  of  course,  limited  to  them. 
But  now  that  it  is  at  twenty-five  cents,  the  class  worth 
only  five  hundred  dollars  per  year  is  just  as  able  to  pur- 
chase it,  as  those  worth  one  thousand  w^ere  formerly. 
Now,  if  thij  class  were  only  of  the  same  number  as  that 
worth  one  thousand,  the  demand  would  be  doubled,  and, 
of  course,  the  laborer  would  sufler  no  injury.  But  the 
fact  is,  that  the  class  worth  five  hundred  dollars,  is  three 
or  four  times  as  large  as  that  worth  one  thousand. 
Hence,  by  all  this  difference,  the  laborer  is  the  gainer, 
and  a  larger  number  of  laborers  is  required.  But  this  is 
not  all.  Tliere  are  various  classes,  between  those  worth 
one  thousand  dollars  and  those  worth  five  hundred  dol- 
lars, who  are  now  able  to  purchase  the  article,  as,  those 
of  nine  hundred,  eight  hundred,  seven  hundred,  and  six 
iiundred,  each  one  of  them  being  larger  than  the  class 
of  first  purchasers.  All  these  unite  to  increase  the  de- 
mand for  this  kind  of  labor.  And  again  :  The  class 
worth  one  thousand  dollars  will  now  use  a  much  largei 
amount  of  cotton  cloth  than  formerly  ;  and  cotton  cloth 
will  now  be  used  for  purjioses  to  which  it  could  never 
before  have  been  appropriated,  and  it  will  supersede  the 
use  of  many  articles,  with  which  it  could  never  before 
have  come  into  competition.  All  this  is  to  be  added  to 
the  benefits  conferred,  by  the  'introduction  of  machinery, 
or  by  increasing  the  ))roductiveness  of  labor,  upon  the 
laborers  in  this  particular  department.  Every  one  must 
see  that  this  benefit,  thus  resulting  from  increase  of  de- 
mand, which  is  the  thing  now  under  consideration,  is  ab- 
solutely incalculable. 

It  may  be  said,  that  this  is  an  exaggerated  case.  1 
answer  :  The  case  is  not  given  for  the  sake  of  accuracy 
in  numbers^  but  for  the  sake  of  illustrating  a  manifest 
tendency.  And,  that,  in  this  respect  it  is  accurate,  tlie 
whole  history  of  manufactures  bears  ample  testimony. 
Compare  those  states  of  society  ni  which  machinery  is 
9* 


102    EFFECTS     OP    INCREASED     PRODUCTIVENESS. 

not  used,  with  those  in  which  it  is  used,  and  inquire  ;ri 
which  of  them  the  wages  of  the  laborer  are  higher,  and 
in  which  his  habitation  disphiys  the  greater  numher  of 
comforts,  and  in  which  his  shelf  is  covered  with  the 
greater  number  of  hooks.  Examine  the  statistics  of 
a  particular  branch  of  manufacture,  and  inquire  in  what 
period  there  has  been,  in  proportion  to  the  whole 
popidation,  the  greatest  number  of  laborers  required  in 
that  particular  manufacture.  Has  this  demand  for  this 
particular  kind  of  labor  been  greater  in  the  period  when 
natural  agents  and  machinery  have  been  used,  or  in  that 
in  which  they  have  not  been  used  ?  The  answer  to 
these  questions  is  given  in  the  history  of  the  progress  of 
the  cotton  manufacture,  the  manufacture  of  books,  of 
nails,  of  pins,  and  every  other  article  of  common  use  : 
and  such  articles  alone  are  of  any  consequence  in  such 
an  estimate.  This  shows  that  the  above  illustration  is 
true,  so  far  as  it  teaches  the  tendency,  which  is  all  that  is 
necessary  in  the  present  case. 

But  this  is  not  all.  Suppose  the  demand  for  cotton 
cloth  to  be  doubled,  there  must  be  twice  the  amount  of 
cotton  produced  ;  twice  as  many  vessels  built,  to  trans- 
port it ;  twice  as  many  men  to  navigate  them  ;  besides 
the  number  of  men  required  to  construct  the  machinery 
necessary  to  fabricate  it.  Suppose  the  number  of  books 
to  be  doubled  ;  there  must  be  twice  as  mucJi  paper  made, 
twice  as  many  rags  purchased,  twice  as  many  types 
made,  and  twice  as  much  transportation  required  for  the 
sup])ly  of  the  market.  All  this  must  add  to  the  demand 
for  labor,  and  must  tend,  by  just  so  much,  to  increaso 
the  wages  of  the  operative.  And  hence,  if  these  con- 
siderations be  conij)are(l,  it  will  be  seen  : 

1.  That  the  introduction  of  machinery  reduces  the 
price  of  articles  of  consumption  ;  that  is,  renders  the 
icagcsy  whatever  they  may  be,  of  the  operative,  of 
more  value. 

2.  That,  by  the  more  rapid  mulli|)lication  of  capital, 
it  produces  a  greater  demand  for  labor  in  general,  that 
is,  it  makes  the  wages  of  all  labor  greater  ;  and 

8.   That  its  tendency  is  to  create  an  increased  demand 


EFFFXTS    OF    INCREASED     PRODUCTIVENESS.     103 

for  label  ;  that  is,  to  produce  a  rise  of  wages  in  tliat  de- 
partment of  industrij,  into  wiiicli  natural  agents  are 
specially  introduced  ;  and  it  does  this  according  to  the 
degree  in  which  they  are  introduced.  Tlial  is,  in  gen- 
eral, the  introduction  of  machinery  renders  the  wages  of 
the  laborer  more  valuable  ;  it  raises  the  wages  of  labor 
in  general,  and  raises  the  wages  of  labor  specially,  in 
that  department  in  which  natural  agents  are  employed. 
Wiiat  any  man  can  reasonably  ask  for,  more  than  this, 
I  do  not  distinctly  perceive. 

II.  The  efi'ects  of  increased  productiveness  upon 
consumers  may  be  easily  explained,  on  the  principles  al- 
ready illustrated.  I  need  not,  therefore,  enlarge  upon  this 
subject,  as  it  has  already  been  so  frequently  alluded  to. 

1.  By  increased  productiveness,  every  consumer  is 
richer  ;  that  is,  he  is  able,  by  the  same  amount  of  labor, 
to  procure  a  greater  amount  of  the  objects  of  desire. 
This  is  evidently  the  same  thing  to  him,  as  though  his 
income  were  increased.  If  I  am  able,  this  year,  with 
two  hundred  dollars,  to  purchase  as  much  as  I  could 
purchase  last  year  for  four  hundred  dollars,  and  I  can 
earn  two  hundred  dollars,  as  easily  as  before,  it  is  pre- 
cisely the  same  thing,  as  if,  at  the  former  prices,  my 
wages  had  risen  from  two  hundred  to  four  hundred 
dollars. 

2.  Production  is  more  perfect.  This  has  already 
been  illustrated,  as  one  of  the  effects  of  the  use  of  ma- 
chinery ;  that  is,  the  consumer  not  only  obtains  more  of 
the  same  article  for  the  same  sum  of  money,  but  he  also 
obtains  a  better  article.  Every  one  must  have  observed, 
that  calicoes,  crockery,  and  many  other  articles  of  ordi- 
nary consiunption,  are  not  only  much  chcaj)er,  but  also 
much  more  beautiful,  than  they  were  a  few  years  since. 

3.  A  vast  number  of  articles  is  thus  added  to  the 
njoans  of  happiness  of  the  human  race,  oi  which,  other, 
wise,  they  must,  from  necessity,  have  been  deprived- 
All  that  we  possess,  above  the  comforts  of  the  naked 
savage,  is  the  result  of  the  use  of  natural  agents,  and  of 
division  of  labf>r  ;  that  is,  of  the  increased  productive- 
ness of  human  lalor. 


104    EFFECTS    OF    INCREASED     PRODUCTIVENESS, 

4.  Nor  is  this  all.  While  all  the  labor  of  man  la 
necessary  to  support  mere  piiysical  existence,  there  can 
be  no  opportunity  i'or  intelleetual  cultivation.  As  soon, 
however,  as  he  arrives  at  that  condition  of  productive 
ness  of  labor,  in  which  he  is  able  to  provide  for  his  phys- 
ical wants,  with  less  than  all  his  time  and  effort,  oppor- 
tunity is  afforded  for  intellectual  development.  At  this 
point,  commences  the  dawn  of  intellectual  improvement. 
As  increased  productiveness  afibrds  more  abundant  lei- 
sure, improvement  advances.  As  soon  again,  as,  by 
improved  intellectual  power,  man  begins  to  discover  and 
apj)ly  the  laws  of  nature,  a  vast  accession  is  made  to  the 
power  of  human  productiveness.  Henceforth,  these 
two  forces  conspire  to  assist  each  other.  Increased  pro- 
ductiveness allows  of  increased  tinte  for  investigation, 
discovery,  ttiid  invention  ;  and  discovery  and  invention 
inciease  the  power  of  productiveness.  The  more  ac- 
tively these  act  and  re-act  upon  each  other,  the  more 
rapid  is  the  progress  of  society,  and  the  more  rapidly 
accelerated  is  the  movement  of  civilization. 

If  this  be  so,  we  see  how  puerile  is  the  prejudice 
which  frequently  exists  against  the  use  of  labor-saving 
machinery  since  the  introduction  of  such  machinery, 
more  than  any  thing  else,  tends  permanently  to  improve 
the  condition  of  the  laborer.  We  see,  also,  how 
groundless  is  the  opinion,  that  education  and  science  are 
without  practical  benefit,  and  that  philosophers  and  stu- 
dents are  merely  a  useless  burden  upon  the  commu- 
nity ;  since  it  is  knowledge  which  has  given  to  us  all  the 
advantages  which  we  possess  over  savages,  and  it  is  the 
application  of  that  knowledge,  which  furnishes  eni|)loy- 
ment  for  nine  tenths  of  the  whole  conminnity.  We  see, 
also,  how  short-sighted  is  that  national  selfishness,  which 
desires  to  limit  and  restrict  the  intercourse  between  na- 
tions ;  since  it  is  for  the  interest  of  each  nation  to  im- 
prove, to  the  utmost,  its  own  advantages,  and  to  pro- 
fuire,  by  exchange  with  other  nations,  those  productions 
for  the  creation  of  which  it  possesses,  by  nature,  inferior 
facilities. 


CHAPTER  THIRD. 

OP    THE    LAWS    WHICH    GOVERN  THE    APPLICATION    OV 
LABOR    TO    CAPITAL. 

We  have  thus  far,  considered  capital  and  labor,  sep- 
arately, and  have  endeavored  to  analyze  the  nature  and 
functions  of  each.  It  is  manifest,  however,  that  we 
have  not  yet  exhausted  the  subject.  ]u  many  countries, 
a  vast  amount  of  capital  and  of  labor  has  never  yet  been 
employed.  In  other  countries,  capital  and  labor  have 
been  united  at  different  periods,  with  different  degrees 
of  success.  Hence,  while  some  nations  have  rapidly 
accumulated  wealth,  the  wealth  of  others  has  remained, 
for  ages,  stationary  ;  and  in  others,  it  has  diminished. 
The  most  fertile  soils  of  Europe  and  Asia,  once  the 
garden  of  the  world,  now  under  the  despotism  of  Tur- 
key, scarcely  maintain  their  sparsely  settled  inhabitants. 
It  remains  for  us,  therefore,  to  proceed  with  our  inves- 
tigation, in  order,  if  possible,  to  ascertain  the  laws  which 
influence  the  application  of  labor  to  capital. 


SECTION  I. 

THE     CONDITIONS     OF     OUR     BEING,     ON     WHICH     THE 
LAWS   ON  THIS    SUBJECT  ARE   FOUNDED. 

In  order  to  arrive  at  the  truth  with  the  greater  cer- 
tainty, it  will  be  proper  to  consider  the  circumstances 
under  which  man  is  placed,  with  reference  to  the  uni- 
verse around  him,  so  far  as  this  subject  is  considered. 

1.  God  has  created  man  with  physical  and  intellectu- 
al faculties,  adapted  to  labor.  He  has  given  us  a  mind, 
adapted  to  investigate  the  laws  of  the  universe,  and  a 
body  adapted  to  perform  all  those  operations  by  which, 


100  C0^JITI0N3     OF    FRODUCTION. 

in  obedience  to   those  laws,  the  objects  of  desire   may 
be  produced. 

2.  Labor  has  been  made  necessary  to  the  attainment 
of  the  means  of  happiness.  No  valuable  object  of  de- 
sire can  be  procured  without  it.  Intellectual  power 
cannot  be  attained  without  intellectual  discipline  ;  nor  a 
krowledge  of  the  laws  of  nature,  without  study.  Nei- 
ther physical  comforts,  nor  even  physical  necessaries, 
can  be  obtained,  unless  labor  be  first  expended  to  pro- 
cure them.  The  universal  law  of  our  existence  is,  "  In 
the  sweat  of  thy  face  shall  thou  eat  thy  bread." 

3.  Labor  is  necessary  to  the  healthful  condition  of 
our  powers,  both  physical  and  intellectual.  Without 
intellectual  labor,  the  mind  becomes  enfeebled  ;  and, 
were  this  labor  wholly  intermitted,  it  would  sink  into 
idiocy  or  madness.  Without  physical  labor,  the  body, 
feeble  and  enervated,  becomes  a  prey  to  pain  and  dis- 
ease. 

4.  Thai  labor,  per  se,  is  pleasant,  it  is  not  necessa- 
ry to  assert.  It  is  sufficient  to  our  purpose,  that  it  is 
less  painful  than  idleness  and  the  results  of  idleness. 
The  laborer  complains  of  his  toil,  but  deprive  him  of 
his  opportunity  for  toil,  and  he  becomes  miserable. 
When  men  are,  in  our  penitentiaries,  condemned  to 
solitary  confinement,  and  labor  or  idleness  are  left  pure- 
ly to  their  own  choice,  they  have  never  been  known  to 
continue  longer  than  a  few  days,  without  beseeching, 
importunately,  for  work.  The  veterans  who  are  sup- 
ported at  Greenwich  Hospital,  England,  at  the  publia 
expense,  wholly  without  labor,  are  said  to  be,  in  gen- 
eral, very  unhappy.  The  uncontrollable  desire  of  chil- 
dren for  some  sort  of  employment,  illustrates  the  same 
truth.  Those  persons  who  consider  labor  as  degrading, 
obey  the  same  aw  of  our  natme  in  another  form.  The 
gymnastic  exercises  of  the  Greeks  and  Romans,  and 
the  hunting,  riding,  shooting,  and  travelling  of  the  mod- 
erns, are  nothing  more  than  expensive  modes  of  exer- 
cise or  labor.  'J'he  poor  man  exercises  himself,  the 
rich  man  employs  a  horse  to  exercise  him.  The  one 
cioes  expensively  and    unproductively,   what    the    other 


CONDITIONS     OF     E'RODUCTION.  107 

does  without  expense  and  productively.  Both  equally 
yield  obedience  to  the  law  of  our  creation  ;  and,  in 
what  manner  soever  it  is  obeyed,  both  reap  advantages, 
from  the  mere  fact  of  obeying  it. 

5.  On  the  contrary,  the  Creator  has  affixed  several 
penalties,  which  those  who  disobey  this  law  of  their  be- 
ing, can  never  expect  to  escape.  He  who  refuses  to 
labor  with  his  mind,  suffers  the  penalty  of  ignorance. 
The  amount  of  this  penalty  may  be  estimated,  by  con* 
sidering  the  blessings,  both  physical  and  intellectual,  of 
which  ignorance  deprives  us  ;  and  by  contrasting  the 
comforts  of  savage  with  those  of  civilized  nations,  where 
the  physical  ellbrt,  made  by  both,  is  the  san)e.  He 
who  refuses  to  labor  with  his  hands,  suffers,  besides  the 
pams  of  disease,  all  the  evils  of  poverty,  cold,  hunger, 
and  nakedness.  The  results  which  our  Creator  has  at- 
tached to  idleness,  are  all  to  be  considered  as  punish- 
ments, which  he  inflicts  for  the  neglect  of  this  establish- 
ed law  of  our  being. 

G.  And,  on  the  other  hand,  Cod  has  assigned  to  in- 
dustry, rich  and  abundant  rewards.  "  The  hand  of  the 
diligent  maketh  rich."  "  Seest  thou  a  man  diligent  in 
his  business,  he  shall  stand  before  kings  ;  he  shall  not 
stand  before  mean  men."  'J'he  pleasure,  the  indepen- 
dence, and  the  power  arising  from  knowledge,  are  the 
rewards  of  intellectual  industry.  "  Jl  wise  man  is 
strongs  yea,  a  man  of  understanding  increaseth  strength. " 
And  it  is  only  by  physical  labor,  that  the  riches  of  the 
earth  are  ap[)ropriaied,  and  the  laws  of  nature  made  avail- 
able to  the  happiness  of  man.  At  the  first  there  existed 
nothing  in  our  world  but  the  earth,  with  its  spontaneous 
productions,  and  capabilities,  and  helpless  and  defence- 
less man.  All  that  now  exists  of  capital,  of  conven- 
ience, of  comfort,  and  of  intelligence,  is  the  work  of 
industry,  and  is  the  reward  which  Cod  has  bestowed 
upon  us  for  obedience  to  the  law  of  our  being. 

7.  If  such  be  the  facts  ;  if  Cod  have  given  to  all  men 
faculties  for  labor  ;  if  he  have  made  labor  /lecessary  to 
our  happiness  ;  if  he  have  attached  the  severest  penal- 
ties to  idleness,  and  have  proffered  tlie   richest   rewards 


108  FKliEDOM     OF    LABOR    AND    CAPITAL. 

to  industry  ;  it  would  seem  reasonable  to  conclude,  that 
all  that  was  required  of  us,  was,  so  to  construct  the  ar- 
ran2;ements  of  society,  as  to  give  free  scope  to  the  laws 
of  Divir.e  Providence.  If  he  have  excited  us  to  labor 
by  sufficient  rewards,  and  deterred  us  from  indolence  by 
sufficient  penalties,  it  would  seem  that  our  business  must 
be,  to  give  to  these  rewards  and  penalties  their  free  and 
their  intended  operation.  These,  at  any  rate,  should  be 
the  means  first  tried,  in  order  to  facilitate  production  ; 
nor  should  any  others  be  resorted  to,  until  these  have 
been  tried  and  found  ineffectual. 

The  effects  of  this  constitution,  under  which  we  are 
placed,  will,  .1  think,  be  fully  exerted,  in  proportion  as 
the  following  conditions  are  observed  :  • 

1.  As  every  man  is  permitted  to  enjoy,  in  the  most 
unlimited  manner,  the  advantages  ol  labor. 

2.  As  every  man  suffers  the  consequences  of  idleness. 
And,  these  being  equal, 

3.  Labor  will  be  applied  to  capital,  according  to  the 
ratio  which  subsists  between  the  whole  amount  of^capi- 
tal  and  the  whole  number  of  laborers  ;  that  is,  the  great- 
er the  ratio  of  capital  to  the  number  of  laborers,  the 
moi-e  active  will  be  their  industry,  and  vice  versa.    And, 

4.  Labor  will  be  applied  to  capital,  in  proportion  to 
the  knowledge  which  men  possess  of  the  advantages 
which  they  shall  obtain  by  labor  ;  that  is,  the  greater  the 
intelligence,  the  greater  the  industry.  To  these  several 
topics,  the  four  following  sections  of  this  chapter  will  be 
devoted. 


SECTION   II. 

INDUSTRY  WILL  BE  APPLIED  TO  CAPITAL,  A3  EVERY 
MAN  ENJOYS  THE  ADVANTAGES  OF  HIS  LABOR  AND 
HIS   CAPITAL. 

Although  God  has  designed  men  to  labor,  yet  he  has 
not  designed  them  to  labor  without  reward.  Hence, 
when  men  devise  some  form  of  labor,  even  for  exercise. 


DIV1SI0.\     DF    PROPERTV.  109 

they  always  connect  with  it  some  resuh,  as  the  game  of 
the  huntsman,  or  the  watering  place  of  the  traveller  or 
tourist.  Thus,  also,  as  it  is  unnatural  to  lahor  without 
receiving  benefit  from  labor,  men  will  not  labor  continu- 
ously nor  productively,  unless  they  receive  such  bene- 
fit. And,  hence,  the  greater  this  benefit,  the  more 
active  and  spontaneous  will  be  their  exertion. 

In  order  that  every  man  may  enjoy,  in  the  greatest 
degree,  the  advantages  of  his  labor,  it  is  necessary, 
provided  always  he  do  not  violate  the  rights  of  his  neigh- 
bor, 1st,  That*lie  be  allowed  to  gain  all  that  he  can  ; 
and,  2d.  T/iaf,  having  gained  all  that  he  can^  he  be  al- 
lowed to  use  it  as  he  will. 

I.  It  is  necessary  that  every  man  be  allowed  to  gain 
all  that  he  can  ;  that  is,  that  the  arrangements  of  socie- 
ty be  so  constructed,  that  every  man  be  able  to  render 
his  labor,  in  the  highest  degree,  available  to  himself. 
This  will  require, 

1.  That  property  be  divided.  When  property  is 
held  in  common,  every  individual  of  the  society  to  which 
it  belongs,  has  an  equal,  but  an  undivided  and  indeter- 
mined  right  to  his  portion  of  the  revenue.  Hence, 
every  one  is  at  liberty  to  take  what  he  will,  and  as  much 
as  he  will,  and  to  labor  as  much  or  as  little  as  he 
pleases.  There  is,  therefore,  under  such  an  arrange- 
ment, no  connexioji  between  lahor  and  the  rewards  of 
labor.  There  is  rather  a  premium  for  indolence  than 
for  industry.  In  such  a  case,  there  will  be  no  regular 
labor,  if  indeed  there  be  any  labor  at  all  ;  and,  what  is 
still  worse,  even  the  scanty  and  spontaneous  produc- 
tions of  the  earth  will  frequently  be  gathered  before 
they  are  ripe,  since  every  one  fears,  that,  if  he  do 
not  seize  them  now,  he  will  never  enjoy  them  at  all 
The  forest  of  an  Indian  tribe  is  held  in  common,  and  a 
few  hundred  families  barely  subsist  upon  a  territory 
which,  were  it  divided  and  tilled,  would  support  a  mil- 
lion of  civilized  men.  The  little  that  it  produces  to 
him.  is  the  result  gf  division  of  property.  His  bow 
and  arrows,  his  wigwam,  and  his  clothing  are  acknowl- 
edged to  be,  in  the  fullest  sense,  his  own.  Were  these 
10 


110  DIVISION     OF     PROPERTY 

to  be  held,  like  his  land,  in  common,  the  whole  race 
would  very  soon  perish,  from  want  of  the  necessaries  of 
life. 

On  the  contrary,  as  soon  as  land  with  all  other  prop- 
erty is  divided,  a  motive  exists  for  regular  and  voluntary 
labor,  inasmuch  as  the  individual  knows  that  he,  and  nol 
his  indolent  neighbor,  will  reap  the  fruit  of  his  toil. 
Henceforth  he  begins  to  create  a  regular  supply  of  an- 
nual product.  With  increased  skill,  this  annual  product 
increases,  and  he  begins  to  convert  it  into  fixed  capi- 
tal, a  form  of  wealth  which  could  scarcely  exist  without 
division  of  property.  Every  accession  to  his  fixed  cap- 
ital renders  his  labor  more  productive,  and  hence  it  cre- 
ates a  stronger  stimulus  to  increased  exer'ion.  With 
increased  exertion,  his  annual  capital  is  increased,  and  a 
greater  surplus  remains  to  be  changed  into  fixed  capital. 
Thus,  increased  production  stimulates  industry,  and  in- 
creased industry  results  in  more  abundant  production. 
Thus,  division  of  property,  or  the  appropriation,  to  each, 
of  his  particular  portion  of  that  which  God  has  given  to 
all,  lays  at  the  foundation  of  all  accumulation  of  wealth, 
and  of  all  progress  in  civilization. 

It  is  for  this  reason  that  property  held  in  common,  is 
so  generally  prejudicial  to  the  best  interests  of  a  socie- 
ty. A  common,  wliere  every  one,  at  will,  may  pasture 
his  cattle,  and  a  forest,  from  which  every  inhabitant  may 
procure  his  fuel,  are  encouragements  to  indolence,  and 
serve  to  keep  a  community  poor.  Thus,  also,  funds 
left  at  large  for  the  support  of  the  poor,  on  which  every 
one  is  supposed  to  have  an  equal  right  to  draw,  have 
generally  been  found  to  foster  indolence.  Poor  laws, 
in  so  far  as  they  are  to  be  considered  a  fund  for  thi«  pur^ 
pose,  have  the  same  sort  of  injurious  tendency. 

2.  liut  the  division  of  property  would  be  of  no  avail 
unless  the  right  of  property  were  enforced  ;  that  is,  un- 
less every  one  be  protected  in  the  undisturbed  possession 
of  whatever  he  has  rightfully  acquired.  As  no  one  will 
labor,  unless  he  knows  that  he  shall  reap  the  fruit  of  hia 
toil,  so  no  one  will  take  the  pains  to  reap  the  fruit  of  his 
toil,  unless  he  also  know  that  he  will  be  able  to  hold  ii,  and 


THE      RIGHT     OF     PROPERTY.  Ill 

appropiiate  it  to  the  purposes  of  his  own  gratification. 
And,  lience,  we  see  that  human  labor  is  exerted  in  dif- 
ferent countries,  very  much  in  |)ro])oriion  as  the  right  of 
property  is  both  understood  and  enforced. 

Tl)e  right  of  property  may  be  violated  by  the  indi" 
viducil  or  by  society.  It  is  violated  by  the  individual, 
by  cheating,  stealing,  robbery,  and  violation  of  con- 
tracts. And,  universally,  just  as  these  crimes  prevail, 
production  languishes,  industry  diminishes,  and  the  rich- 
est soil  fails  to  support  its  few  and  impoverisiied  inhabi- 
tants. Such  was  the  case  in  Europe,  during  the  era  of 
feudal  oppression.  'J'here  was  tiien  no  encouragement 
to  labor,  because  no  one  knew  whether  lie,  or  a  baronial 
tyrant,  would  reap  the  fruit  of  his  industry. 

Hence,  we  see  the  economical  importance  of  all 
means  which  shall  prevent  the  indicidiial  violation  of  the 
right  of  properly.      These  means  are  tvto. 

The  first  is,  the  inculcation  of  those  moral  and  reli- 
gious principles,  which  teach  men  to  respect  the  rights  of 
others  as  their  own,  that  is,  to  obey  the  law  of  reciproci- 
ty ;  and  which  present  the  strongest  conceivable  reas- 
ons for  so  doing.  This  i^  the  most  certain  method  of 
preventing  the  violation  of  the  right  of  property,  inas- 
much as  it  aims  to  eradicate  those  dispositions  of  mind, 
from  which  all  violation  proceeds.  Jt  is  also  the  cheap- 
est., as  it  aims  at  pretention,  which  is  always  more  econ 
omical  than  cure.  It  is  also  necessary.^  inasmuch  as 
good  laws  will  never  be  enacted,  or  if  enacted,  will  nev- 
er be  obeyed,  only  in  so  far  as  there  exists  a  moral  char- 
acter in  the  community  suflicicMitly  pure  to  sustain  them. 
In  proportion  as  these  are  eflicacious,  all  other  means 
are  needless.  Hence,  we  see  the  reason  why  moral 
and  religious  nations  grow  wealthy  so  much  more  rapidly 
than  vicious  and  irreligious  natioiis.  The  feeling  of  per- 
fect tranquillity  and  security,  which  a  high  social  morali- 
ty diffuses  over  a  whole  community,  is  one  of  the  most 
beneficial,  as  well  as  one  of  the  strongest  stimulants  tc 
universal  industry.  This  is  one  of  the  temporal  rewards 
which  God  bestows  upon  social  virtue.  And,  inasmuch 
as  no  one  can  en'py  this  reward,  simply  by  bemg  virtu- 


112  THE     RIGHT    OF     PROPERTY. 

ous  himself,  but  only  as  his  fellow  citizens  also  are  virtu 
ous,  we  see  the  indication  in  our  constitution,  that  il  is  the 
duty,  as  well  as  the  interest,  of  every  man,  to  labor  to 
render  other  men  more  virtuous. 

3.  But  inasmuch  "as  all  men  are  not  influenced  in  their 
conduct  by  moial  and  religious  principles,  it  is  necessary 
that  aggression  be  somehow  prevented,  and  violations  of 
property,  in  so  far  as  possible,  redressed.  Hence,  the 
importance  of  wholesome  and  equitable  laws,  of  an  in- 
dependent and  firm  judiciary,  and  an  executive,  which 
shall  carry  the  decisions  of  law  faithfully  into  effect. 
Hence  the  expense,  necessary  for  the  most  perfect  ad- 
ministration of  justice,  is  among  the  most  productive  of 
all  the  expenditures  of  society.  Good  law,  and  the 
faithful  administration  of  it,  are  always  the  cheapest  law, 
and  the  cheapest  administration  of  it.  The  interests  of 
man  require  that*  law  should  be  invariably  executed,  and 
that  its  sovereignty  should,  under  all  circumstances,  be 
inviolably  maintained. 

But  the  right  of  property  may  be  violated  by  society. 
It  sometimes  happens,  that  society,  or  government, 
which  is  its  agent,  though  it  may  prevent  the  infliction  of 
wrong  by  individuals  upon  each  other,  is  by  no  means 
averse  to  inflicting  wrong  or  violating  the  right  of  indi- 
viduals itself.  This  is  done,  where  governments  seize 
upon  the  property  of  individuals  by  mere  arbitrary  act, 
a  form  of  tyranny,  with  which  all  the  nations  of  Europe 
were,  of  old,  too  well  acquainted.  It  is  also  done,  by 
unjust  legislation  ;  that  is,  when  legislators,  how  well  so- 
ever chosen,  enact  unjust  laws,  by  which  the  property 
of  a  part,  or  of  the  whole,  is  unjustly  taken  away,  or 
what  is  the  same  thing  subjected  to  oppressive  taxation. 

(Jf  all  the  destructive  agencies  which  can  be  brought 
to  bear  upon  production,  by  far  the  most  fatal,  is  public 
oppression.  Itr'  drmks  up  the  spirit  of  a  people,  by  in- 
flicting wi'ong  through  means  of  an  agency  which  was 
created  for  the  sole  purpose  of  preventing  wrong  ;  and 
which  was  intended  to  be  the  ultimate  and  faithful  refuge 
of  the  friendless.  When  the  antidote  to  evil,  becomes 
the  source  oi   evil,  what   hope  for  man  is  left  ?     Wlien 


FREKDOM     OF    INDUSTRY    AND    CAPITAL.  113 

society  itself  sets  the  example  of  peculation,  what  shall 
prevent  tlie  individuals  of  the  society  from  imitating  that 
example  ?  Hence,  public  injustice  is  always  the  prolific 
parent  of  private  violence.  The  result  is,  that  capital 
emigrates,  production  ceases,  and  a  nation  either  sinks 
down  in  hopeless  despondence  ;  or  else  the  people, 
harassed  beyond  endurance,  and  believing  that  their  condi- 
tion cainiot  be  made  worse  by  any  change,  rush  into  all  the 
horrors  of  civil  war  ;  the  social  elements  are  dissolved  ; 
the  sword  enters  every  house  ;  the  holiest  ties  which 
bind  men  together  are  severed  ;  and  no  prophet  can 
predict,  at  the  beginning,  what  will  be  the  end. 

Hence  we  see  the  iinportance  to  the  industry  of  a 
country,  *of  a  constitution  which  guarantees,  to  the  indi- 
vidual, immunity  not  only  from  private,  but  also  from 
public  oppression.  Wherever  this  immunity  is  wanting, 
the  progress  of  a  nation  in  wealth  will  be  slow.  It  is 
owing  rather  to  the  freedom  of  her  institutions  and  the 
equity  of  her  laws,  than  to  her  physical  advantages,  that 
Great  Britain  has  so  far  outstripped  all  other  European 
nations  in  the  accumulation  of  wealth,  and  in  every 
thing  that  confers  social  power.  It  is  almost  superflu- 
ous, however,  to  add,  that  a  free  constitution  is  of  no 
value,  unless  the  moral  and  intellectual  character  of  a 
people  be  sufficiently  elevated  to  avail  itself  of  the  ad- 
vantages which  it  oflers.  It  is  merely  an  instrument  of 
good,  which  will  accomplish  nothing,  unless  there  exist 
the  moral  disposition  to  use  it  aright. 

To  sum  up  Avhat  has  been  said  :  Labor  will  be  ap- 
plied to  capital,  in  proportion  as  every  man  is  allowed 
to  gain  all  that  he  can  ;  that  is,  as  property  is  most  per- 
fectly divided  ;  and  as  this  division  is  most  strictly  en- 
forced ;  that  is,  as  the  right  of  property  is  guarded  by 
the  most  equitable  laws  ;  and  as  there  exist  the  strong- 
est guarantees  that  these  laws  wiH  be  inviolate,  whelhei 
they  relate  to  individuals  or  to  society. 

II.  The  second  part  of  the  condition  mentioned  in 
the  beginning  of  this  section  is,  that  the  individual  be 
allowed  to  use  his  own  as  he  will.  To  this,  is  of  course 
10* 


114  FREEDOM    OF    INDUSTRY    AND    CAPITAL. 

to  be  added  the  condition,  that  he  use  it  in  sucn  manner, 
as  not  to  interfere  with  the  rights  of  his  neighbor. 

A  man's  possessions  are  his  talents,  facuhies,  skill, 
and  the  wealth  and  reputation  which  these  have  enabled 
him  to  acquire  ;  in  other  words,  his  industry  and  his 
capital.  In  order  that  industry  be  applied  to  capital 
with  the  greatest  energy,  it  is  necessary  that  every  man 
be  at  hberty  to  use  them  both  as  he  will ;  that  is,  that 
both  of  them  be  free. 

And  first,  of  industry.  The  aptitudes  of  men  for 
different  employments  are  very  dissimilar.  The  choice 
of  every  man  naturally  leads  him  to  that  employment  for 
which  he  is  best  adapted.  By  allowing  every  man, 
therefore,  to  employ  his  industry  as  he  chooses,  every 
man  will  be  employed  about  that  for  which  he  is  best 
adapted  ;  and  hence,  the  production  of  all  will  be  great- 
ly increased,  because  we  thus  avail  ourselves  of  the  pe 
culiar  productiveness  ,of  every  individual.  Nor  is  this 
all.  By  allowing  evoy  man  to  labor  as  he  chooses,  we 
very  greatly  increase  the  happiness  of  every  individual. 
And  every  one  knows  that  a  man  will  labor  with  better 
success  when  his  labor  is  pleasant,  than  when  it  is  irk- 
some. 

The  case  is  the  same  with  respect  to  capital.  Every 
man  is  more  interested  in  his  own  success,  than  any 
other  man  can  be  interested  in  it.  Hence,  every  man  is 
likely  to  ascertain  more  accurately  in  what  manner  he 
can  best  employ  his  capital,  than  any  other  man  can  as- 
certain it  for  him.  If  every  man,  therefore,  be  allowed 
to  invest  his  capital  as  he  will,  the  whole  capital  of  a 
country  will  be  more  profitably  invested,  than  under  any 
other  circumstances  whatever.  And,  since,  when  he  is 
left  thus  at  liberty,  there  will  be  the  greatest  gain  to  the 
capitalist,  there  will  also  be  the  greatest  stinndus  to  his 
industry  ;  for  the  stimulus  to  labor  is  always  in  propor- 
tion to  the  rewards  of  labor.  And,  on  the  contrary,  in 
just  so  far  as,  by  anv  means,  this  productiveness  is  di- 
nn'nishcd,  the  stimulus  to  labor  is  also  diminished  with  it. 

It  may  be  sold  that  men,  if  left  to  themselves,  will  be 
liable  to  invest  their  capital  unwisely.     Granted.     Man 


FREEDOM    OF    INDUSTRY    AND    CAPITAL.  115 

IS  not  omniscient,  and  therefore  this  habihty  cannot  bo 
avoided.  The  question,  tlieiefore,  is,  how  shall  il  be 
rendered  as  small  as  possible.  Will  a  man,  who  reaps 
the  benefit  of  success  and  sullers  tiie  evils  of  failure,  be 
less  likely  to  judge  correctly,  than  he  whose  faculties  are 
quickened  by  no  such  responsibility  .''  Nor  is  this  all. 
Not  only  are  legislators,  who  generally  assume  the  labor 
of  directing*  the  manner  in  which  labor  or  capital  shall 
be  employed,  in  no  manner  peculiarly  qualified  for  this 
task  ;  they  are,  in  many  respects,  peculiarly  disqualified 
for  it.  The  individual  is  liable  to  no  peculiar  biases, 
in  making  up  his  mind  in  respect  to  the  profitableness  of 
an  investment.  If  he  err,  it  is  because  the  indications 
deceive  him.  The  legislator,  besides  being  liable  to  err 
by  mistaking  the  indications,  is  liable  to  be  misled  by 
party  zeal,  by  political  intrigue,  and  by  sectional  preju- 
dice. What  individual  would  succeed  in  his  business, 
if  he  allowed  himself  to  be  influenced  in  the  manner  of 
comlucting  it,  by  such  considerations  ?  And  must  not 
like  causes  always  produce  like  results  ? 

Besides,  every  man  feels,  instinctively,  that  he  has  a 
right  to  use  his  capital  and  his  industry  as  he  pleases, 
provided  he  interfere  not  with  the  rights  of  another  ; 
and  that,  to  restrict  him  in  this  use,  is  injustice.  We 
have  before  said,  that  nothing  ])aralyzes  industry  like  op- 
pression, and  *it  is  as  true  in  this  case,  as  in  any  other. 
If  this  sort  of  interference  be  violent  or  frequently  re- 
peated, capital  and  labor,  whose  motto,  like  that  of  Dr. 
Franklin,  is,  "  Where  liberty  dwells,  there  is  my  coun- 
try," will  emigrate  to  some  more  congenial  social  atmo- 
sphere. And  if  the  interference  be  not  so  intolerable 
as  to  produce  these  results,  yet,  in  just  so  far  as  it  has 
any  (>(rect,  it  is  all  of  thrs  kind,  and,  by  its  whole  opeia- 
tion,  must  diminish  the  incitements  to  industry. 

And,  on  the  contrary,  just  in  proportion  as  every  in- 
dividual is  free  to  employ  his  industry  and  capital  as  he 
chooses,  and  thus  both  to  receive  a  larger  compensation 
for  his  labor,  and  also  to  laoor  more  happily,  will  be  the 
inducements  to  industry  and  to  the  investment  of  capital. 


116  FREEDOM    OF    INDUSTRY. 

If  this  be  so,  we  see  the  impohcy  of  several  forms  of 
leglshitive  interference,  in  relation  to  this  subject. 

1.  We  see  what  must  be  the  effects  of  monopolies. 
A  monopoly  is  an  exclusive  right  granted  to  a  man,  or 
to  a  company  of  men,  to  employ  their  labor  or  capita! 
in  some  particular  manner.  Such  was  the  exclusive 
right  granted  to  the  East  India  Company,  to.  import  into 
the  poits  of  Great  Britain^  or  her  territories,  the  produc- 
tions of  all  countries  east  of  the  Cape  of  Good  Hope. 
Such  were  the  privileges  granted  formerly  by  Spain,  to 
particular  individuals  or  companies,  of  importing  foreign 
commodities  into  the  ports  of  her  colonies  in  South 
America.  The  result  of  this  exclusion  was  to  prevent 
all  other  persons,  except  those  thus  favored,  from  in- 
vesting their  capital  in  this  manner  ;  and  hence,  to  re- 
duce the  value  of  that  capital,  by  precisely  the  amount 
of  this  effect.  Nor  is  this  all.  Those  who  hold  this 
exclusive  privilege,  being  liable  to  no  competition,  may 
charge  for  their  commodities  whatever  they  choose 
Here  is,  therefore,  a  two-fold  injustice ;  first,  the  means 
of  the  consumer  are  diminished  ;  and  secondly,  the 
price  which  he  must  pay,  is  enhanced  at  the  mere  will 
of  his  oppressor. 

2.  Hence  we  see  the  impolicy  of  obliging  an  indi- 
vidual, or  a  class  of  individuals,  to  engage  in  any  labor, 
or  to  make  any  investment,  contrary  to  their  wishes. 
Thus,  we  are  told  that  during  the  French  revolution, 
some  individuals  were  punished  capitally,  for  raising  cat- 
tle instead  of  wheat.  Men  may  call  ih'is  Jrgi si ati on,  but 
the  true  name  for  it  is  robbery.  To  oblige  a  man  to 
raise  a  crop  worth  fifteen  dollars  per  acre,  when  he 
would  otherwise  have  raised  one  worth  twenty  dollars 
per  acre,  is  just  the  same  thing*  as  to  let  him  do  as  he 
pleases,  and  then  rob  him  of  five  dollars  an  acre  after- 
wards. The  wrong  is  the  more  intense,  in  the  former 
case,  inasmuch  as  it  is  done  under  the  semblance  of  jus- 
tice, and  by  men  who  claim,  as  the  robb(?r  docs  not, 
Hiat  they  have  the  rigid  to  do  it.  Such  legislation  as 
this  H'ilj,  in  any  country,  soon  produce  a  famine. 

3    Another  form  of  injury  under  this  class,  is  seen  in 


FREEDOM    OF    INDUSTRY.  117 

the  restrictions  upon  mdustry,  formerly,  if  not  now,  ex- 
isting in  many  of  the  countries  of  Kuroj)e.  By  these 
regulations,  artisans  were  prohibited  the  exercise  of 
more  than  one  trade  ;  they  were  not  allowed  to  exercise 
that  trade,  unless  they  had  served  a  presciibed  a])pren- 
ticeship  ;  nor  unless  they  joined  a  particular  trade-soci- 
ety, and  bound  themselves  to  comply  widi  certain  restric- 
tions, as,  for  instance,  to  sell  at  particular  prices,  and 
never  to  employ  beyond  a  certain  number  of  appren- 
tices. The  result  of  all  this  0[)j)ression  is  most  iniqui- 
tous. It  reduces  the  value  of  skill  and  industry,  the 
sole  estate  of  the  laborer  ;  and  places  him  in  the  power 
of  those  whose  interest  it  is  to  reduce  the  su])j)Iy  as 
much  as  possible,  in  order  to  secure  to  themselves  the 
most  exorbitant  profit.  In  such  cases,  a  large  amount 
of  available  industry  must  be  kept  out  of  emj)loyment  ; 
and,  of  course,  production  is,  to  this  whole  amount,  di- 
minished. The  tyranny  of  trades-unions,  though  ema- 
lating  from  the  j)eo})le  instead  of  the  government,  pro- 
duces precisely  the  same  effect. 

4.  I'he  same  eflect  is  partially  produced  by  any  mode 
of  legislation,  by  which,  in  consequence  of  favor  shown 
to  one  party,  which  of  course  another  party  must  pay 
for,  men  are  obliged  to  exchange  an  employment,  for 
which  they  have  peculiar  facilities,  for  another  which 
they  do  not  prefer,  and  for  which  they  have  not  the 
same  facilities.  The  manner  in  which  this  would  lessen 
the  stimulus  to  industry,  has  already  been  illustrated. 
Thus,  should  our  government,  believing  that  comnierce 
was  more  valuable  to  this  country  than  manufactures, 
lay  a  tax,  sufficient  to  meet  the  expenses  of  the  govern 
ment,  upon  all  American  manufactures,  in  order  to  in- 
crease the  amount  of  foreign  iriportation,  this  would 
drive  manufacturers  out  of  business  and  oblige  them  to 
become  merchants  and  agriculturists.  I  think  that  every 
one  must  see  that  this  would  diminish  the  stimulus  to 
industry  throughout  the  whole  country.  Men  would  not 
voluntarily  engage  in  manufactures  in  preference  to  com- 
merce, unless  they  found  manufactures  to  be  more  profit- 
able ;  and  to  oblige  them  to  exchange  the  one  for  the 


118  PREVENTION  OF  IDLENESS. 

Other,  IS,  therefore,  to  oblige  them  to  leave  a  moie  pro* 
ductive  for  a  less  productive  mode  of  employment.  By 
all  this  difference  is  the  country  the  loser,  and  the  incite- 
ment to  industry  diminished. 

5.  Hence,  we  also  see  the  impolicy  of  laws  regulating 
consumption.  Such  are  sumptuary  laws  ;  or  those 
which  limit  the  degree  of  expensiveness  in  our  dress, 
clothing,  or  equipage.  These  were  formerly  common 
m  Europe.  Such  also  are  laws  which  forbid  or  restrict 
the  expenditure  of  money  for  the  purposes  of  benevo- 
lence, religion,  or  any  thing  of  this  sort.  Every  one 
must  see  that  one  of  the  incitements  to  industry,  is  the 
pleasure  which  men  expect  to  derive  from  expenditure. 
Now,  if  this  expenditure  be  innocent,  it  matters  not 
what  sort  of  expenditure  it  is.  Society  has  nothing  to 
do  with  it ;  and  it  can  in  no  manner  interfere  with  it, 
without  doing  injustice,  and  taking  away  one  of  the 
strongest  inducements  to  industry. 


SECTION  III. 

LABOR  WILL  BE  APPLIED  TO  CAPITAL  IN  PROPOR- 
TION AS  EVERY  MAN  SUFFERS  THE  INCONVEN- 
IENCES    OF    IDLENESS. 

If  God  have  made  labor  necessary  to  our  well  being, 
in  our  present  state  ;  if  he  have  set  before  us  sufficient 
rewards  to  stimulate  us  to  labor  ;  and  if  he  have  attach- 
ed to  idleness  correspondent  punishments,  it  is  manifest 
that  the  intention  of  this  constitution  will  not  be  accom- 
plished, unless  both  of  these  classes  of  motives  are  al- 
lowed  to  operate  upon  man.  We  shall,  therefore,  co- 
operate will)  [liin,  in  just  so  far  as  we  allow  his  designs 
to  take  clFect  in  the  manner  he  intended. 

Now  this  result  will  be  accomj)lished, 

1.  By  the  division  of  properly.  When  property  is 
perfectJy   divided,   and  every  thing   is  owned  by  some 


PREVENTION  OF  inLENESS,  ll9 

one,  and  cveiy  one  knows  what  is  his  own,  nothing  is 
left  in  common.  Of  course,  no  man  can  then  obtain 
any  thing  more  than  he  now  possesses,  unless  he  obtain 
it  by  labor.  And  as  every  man  has  faculties  capable  of 
labor,  and  as  these  are  exclusively  his  own  ;  and  as 
every  one,  who  possesses  capital,  desires  to  employ  la- 
bor with  which  to  combine  it,  every  man  who  possesses 
his  natural  faculties,  has  the  means  by  which  he  may  ob- 
tain something  for  his  subsistence.  The  division  of 
property  is  thus  favorable  to  the  laborer  ;  inasmuch  as, 
in  consequence  of  it,  every  one  needs  his  labor,  and 
also  has  something  to  give  hin.  in  exchange  for  it. 

2.  But  suppose  property  to  be  universally  divided. 
A  man  may  possess  himself,  cither  dishonestly  or  by 
begging,  of  the  property  for  which  he  has  not  labored. 
The  dishonest  acquisition  of  property,  as  by  cheating, 
stealing,  or  robbery,  will  be  prevented  by  the  strict  and 
impartial  administration  of  just  and  equitable  laws. 
Hence,  we  see  that  the  benefit  of  such  laws  is  two-fold. 
They  encourage  industry,  first,  by  securing  to  the  indus- 
trious the  righteous  reward  of  their  labor  ;  and,  second- 
ly, by  inflicting  upon  the  indolent  the  just  ])unishinent  of 
their  idleness  ;  or,  rather,  by  leaving  them  to  the  conse- 
quences which  God  has  attached  to  their  conduct.  Be- 
ing thus  thrown  upon  their  own  resources,  they  must 
obey  the  law  of  their  nature,  and  labor,  or  else  suffer 
the  penalty  and  starve. 

If  any  man  complain  that  this  is  a  hardship,  he  must 
mean  that  this  hardship  has  reference  to  our  relations 
either  to  man  or  to  Cod.  So  f;\r  as  our  relations  to  man 
are  concerned,  there  can  certainly  be  no  hardship  ;  for 
every  thing  that  we  see  is  the  result  of  labor,  and  is 
either  the  result  of  the  labor  of  him  that  holds  it,  or  of 
iiim  who  voluntarily  parted  with  it  for  an  equivalent  in 
labor.  Now,  as  every  thing  we  see  is  the  result  of  la- 
bor, the  question  is,  who  shall  enjoy  this  result  of  labor, 
he  who  has  labored,  or  he  who  has  not.  If  it  be  a 
hardship  for  a  inan  not  to  enjoy  that  for  which  he  has 
not  labored  ;  it  would  certainly  be  a  much  greater  hard- 
ship for  a   man  not  to  enjoy  that  for  which  he  has  la- 


120  POOR    LAWS. 

bored.  So  that,  the  hardship  would  be  greater  if  the 
system  were  arranged  to  suit  the  complainant,  than  it  is 
now,  under  the  system  of  which  he  complains. 

If  the  hardship  turn  upon  our  relations  to  God  ;  that 
is,  if  a  man  complain  because  God  made  him  to  labor, 
it  is  a  difficulty  which  the  complainant  must  settle  with 
his  Maker.  We  have  nothing  to  do  with  it.  But  since 
God  has  ordained  it,  we  cannot  help  it,  and  an  indolent 
man  has  no  just  cause  of  grief  with  his  fellow  men,  if 
they  see  fit  to  act  according  to  it. 

II.  But  men  may  be  relieved  from  the  necessity  of 
labor,  by  charity.  It  will  be  understood  that  I  here 
speak  of  men  as  poor  from  indolence,  and  not  by  visita- 
tion of  God.  I  do  not  here  refer  to  the  sick,  the  infirm, 
the  aged,  the  helpless,  the  widow,  the  fatherless,  and 
the  orphan.  When  God  has  seen  fit  to  take  away  the 
power  to  labor,  he  then  calls  upon  us  to  bestow  liberally, 
and  he  always  teaches  us,  that  this  mode  of  expenditure 
of  our  property  is  more  pleasing  to  him  than  any  other. 
With  this  mode  of  charity  I  have  now  nothing  to  do. 
I  speak  only  of  provisions  for  the  support  of  the  poor, 
simply  because  he  is  poor  ;  and  of  provisions  to  supply 
his  wants,  without  requiring  the  previous  exertion  of  his 
labor.  Of  this  kind  are  poor  laws,  as  they  are  estab- 
lished in  England,  and  in  some  parts  of  our  own  country, 
and  permanent  endowments  left  to  particular  corpora- 
tions for  the  maintenance  of  the  simply  indigent.  Now 
such  provisions  we  suppose  to  be  injurious,  for  several 
reasons. 

1.  They  are  at  variance  witii  the  fundamental  law  of 
government,  that  he  who  is  able  to  labor,  shall  enjoy 
only  that  for  which  he  has  labored.  If  such  be  the  law 
of  God  for  us  all,  it  is  best  for  all,  that  all  should  be 
subjected  to  it.  If  labor  be  a  curse,  it  is  unjust  thai 
one  part,  and  that  the  industrious  part,  should  sufTer  it 
all.  If,  as  is  the  fact,  it  be  a  blessing,  there  is  no  rea- 
son why  all  should  not  equally  enjoy  its  advantages. 

2.  They  remove  from  men  the  fear  of  want,  one 
of  the  most  natural  and  universal  stimulants  to  labor. 
Hence,  in  just  so  far  as  this  stimulus  is  removed,  there 


PCOR    LAWS.  121 

will  be,  in  a  given  community,  less  labor  done  ;  that  is, 
less  product  created. 

3.  By  teaching  a  man  to  depend  upon  others,  rather 
than  upon  himself,  they  destroy  the  healthful  feeling  of 
independence.  When  this  has  once  been  impaired,  and 
the  confidence  of  man  in  the  connexion  between  labor 
and  reward  is  destroyed,  he  becomes  a  pauper  for  life;. 
It  is  in  evidence,  before  the  connnittee  of  the  British 
House  of  Commons,  that,  after  a  family  has  once  a|)[)li- 
ed  for  assistance  from  the  parish,  it  rarely  ceases  to  ap- 
ply regularly,  and  most  frequently,  in  progress  of  time, 
fur  a  larger  and  larger  measure  of  assistance 

4.  Hence,  such  a  system  must  tend  greatly  to  increase 
\he  number  of  paupers.  It  is  a  discouragement  to  in- 
dustry, and  a  bounty  upon  indolence.  With  what  spirit 
will  a  poor  man  labor,  and  retrench,  to  the  utmost,  his 
expenses,  when  he  knows  that  he  shall  be  taxed  to  sup- 
port his  next-door  neighbor,  who  is  as  able  to  work  as 
himself  ;  but  who  is  relieved  from  the  necessity  of  a 
portion  of  labor,  merely  by  applying  to  the  overseer  of 
the  poor  for  aid. 

5.  They  are,  in  principle,  destructive  to  the  right  of 
property,  because  they  must  proceed  upon  the  conces- 
sion, that  the  rich  are  under  obligation  to  support  the 
poor.  If  this  be  so  ;  if  he  who  labors  be  under  obliga- 
tion to  support  him  that  labors  not  ;  then  the  division  of 
property  and  the  right  of  property  are  at  an  end  :  for,  he 
who  labors  has  no  better  right  to  the  result  of  his  labor, 
than  any  one  else. 

6.  Hence,  they  tend  to  insubordination.  For,  if  the 
rich  are  under  ^obligation  to  support  the  poor,  why  not 
to  support  them  better  ?  nay,  why  not  to  si'pport  them 
as  well  as  themselves  ?  Hence  the  larger  provision  there 
is  of  his  kind,  the  greater  will  be  the  liability  to  collis 
ion  between  the  two  classes. 

If  this  be  so,  we  see,  that  in  order  to  accomplish  the 
designs  of  our  Creator  in  this  respect,  and  thus  present 
the  strongest  inducement  to  industry, 

I.    Property  should  be  universally  appropriated,  so 
that  nothing  is  left  in  common. 
11 


122  POOR    LA.WS. 

2.  The  right  of  propert)'  should  be  perfecily  protect 
ed,  both  against  individual  and  social  sj)oliaiion. 

3.  There  should  be  no  funds  in  common  provided  for 
the  support  of  those  who  are  not  willing  to  labor. 

4.  That  if  a  man  be  reduced,  by  indolence  or  prodi 
gality,  to  such  extreme  penury  that  he  is  in  danger  of 
perishing,  he  should  be  relieved,  through  the  medium  of 
labor  ;  that  is,  he  should  be  furnished  with  work,  and  be 
remunerated  with  the  proceeds. 

5.  That  those  who  are  enabled  only  in  part  to  earn 
their  subsistence,  be  provided  for,  to  the  amount  of  that 
deficiency  only. 

And  hence,  that  all  our  provisions  for  the  relief  of  the 
poor,  be  so  devised  as  not  to  interfere  with  this  law  of 
our  nature.  By  so  directing  our  benevolent  energies, 
the  poor  are  better  provided  for  ;  they  are  happier  them« 
selves  ;  and  a  great  and  constantly  increasing  burden  is 
removed  from  the  conmiunity.  It  has  been  found  that 
alms-houses,  conducted  on  this  plan,  will  support  them- 
selves ;  and  sometimes  even  yield  a  small  surplus  rev- 
enue. This  surplus,  however,  should  always  be  given 
to  the  paupers,  and  should  never  be  received  by  the 
public.  The  principle  should  be  carried  out,  that  the 
laborer  is  to  enjoy  the  result  of  his  industry. 

For  the  same  reason,  penitentiaries  and  State  prisons 
should  always  be  places  of  assiduous  and  productive  la- 
bor. Idleness  is  a  most  prolific  parent  of  crime.  If 
the  vicious  could  be  accustomed  to  labor,  one  half  of 
their  reformation  would  be  efTected. 

Besides,  by  this  means,  a  great  diminution  would  be 
effected  in  the  expense  to  the  communi^.  There  can 
be  no  reason  why  a  hundred  able-bodied  men,  and  such 
are  generally  the  tenants  of  our  prisons,  should  not  both 
support  themselves,  and  pay  for  the  superintendence 
necessary  to  their  labor.  In  a  well  regulated  prison, 
they  will  always  do  this.  There  must  always  be  some- 
thing dee]>ly  culpable  in  the  arrangements  of  such  an 
institution,  where  this  is  not  the  result. 

And  thus  where  a  society  is  so  organized,  that  every 
man  is    left  to  suffer  the  results  of  idleness ;  that  is, 


RATIO  OF  CAPITAL  TO  LABOR         123 

where  labor  is  made  necessary  to  the  acquisition  oi  every 
thing  desirable,  and  where  the  results  of  that  labor  are 
most  perfectly  secured  to  the  laborer,  there  will  exist  the 
greatest  stimulus  to  labor,  and,  of  course,  production 
will  be  most  rapidly  augmented. 


SECTION  IV. 

THE  GREATER  THE  RATIO  OF  CAPITAL  TO  LABOR, 
THE  GREATER  WILL  BE  THE  STIMULUS  TO  LABOR. 

The  principle  to  be  considered  in  this  section  may  be 
thus  illustrated.  Capital  is  useless,  that  is,  will  yield 
no  revenue,  unless  it  be  united  with  labor.  A  farm  will 
yield  nothing,  unless  it  be  tilled,  and  the  grain  harvested  ; 
raw  cotton  and  a  manufactory  will  produce  nothing,  un- 
less there  be  workmen  to  labor  in  it.  Hence,  every 
man  who  holds  capital.,  is  desirous  of  uniting  it  with  in- 
dustry, that  he  may  sliare,  with  the  laborers,  the  profits 
of  the  resulTiLg  product.  On  the  contrary,  he  who  has 
industry,  is  desirous  of  uniting  it  with  capital,  because, 
unless  he  can  so  unite  it,  it  will  yield  notliing  in  return. 
A  man  can  earn  nothing  by  spending  his  whole  time  in 
beating  the  air.  Hence,  when  the  number  of  laborers 
is  great  ;  that  is,  where  labor  is  abundant,  and  the 
amount  of  capital  small,  there  will  be  a  competition  of 
laborers  for  work,  and  the  price  of  labor  will  fall  ;  that 
is,  the  laborer  will  receive  a  less  compensation  for  his 
work.  On  the  contrary,  when  the  number  of  laborers 
is  small,  and  the  amount  of  capital  great,  there  will  be 
competition  among  capitalists  for  labor  ;  that  is,  the 
price  of  labor  will  rise  ;  and  the  laborer  will  receive  a 
greater  compensation  for  his  work.  'J'hus,  we  seo,  the 
greater  the  amount  of  ca[)ital,  in  proportion  to  the  nunj- 
ber  of  laborers,  the  greater  will  be  the  rate  of  wages, 
and,  of  com'se,  the  stronger  the  stimulus  to  industiy. 

It  deserves,  however,  to  be  remarked,  that  this  prin- 
ciple is  liable  to  some  important  modifications.      Thus,  it 


124  RATIO    OK    CAPITAL    TO    LABOR. 

IS  practically  true,  only  in  so  far  as  men  conti.Aie  to  be 
operated  upon  by  the  liope  of  reward.  When  this  ceas- 
es to  operate,  and  wages  are  so  low  as  to  render  the 
utmost  amo;:nt  of  labor  necessary  to  avoid  starvation, 
men  will  work  more  assiduously,  the  lower  the  wages  ; 
that  is,  the  nearer  they  are  to  actual  starvation.  But,  to 
this,  there  is  also  a  limit.  Human  beings  cannot  long 
endure  great  toil,  under  the  depressing  influences  of  de- 
spair. Many  very  soon  die,  and  thus  a  diniinislied  pop- 
ulation again  raises  the  price  of  labor.  Another  com- 
mon result  of  such  a  condition  of  laborers,  is  domestic 
insurrection.  Men  who  have  long  stood  on  the  borders 
of  starvation,  become  dejperate.  They  know,  that  by 
no  change  could  their  condition  be  made  worse  ;  hence 
cupidi  rerum  nornrum^  they  unite  under  any  agitator 
who  promises  them  bread  ;  the  wliole  fabric  of  society 
is  prostrated  ;  and  civil  war  and  anarchy  succeed. 

Another  modification  of  this  principle,  is  the  fo'lovv- 
mg  :  I  have  said  above,  that  the  stimulus  to  labor  is  in 
proportion  to  the  wages  of  labor.  This  will  be  true, 
only  of  those  cases  where  the  facilities  of  gratifying 
desire  are  equal.  Although  wages  be  high,  yet  if  only 
few  objects  of  desire  can  be  procured  in  exchange  for 
them,  there  will  be  wanting  one  important  element  in 
stimulating  the  humair  being  to  labor.  Plence,  the  stim- 
ulus to  labor  will  be  the  most  effective,  when  the  wages 
are  highest,  and  when,  by  means  of  wages,  the  greatest 
number  of  desires  can  be  gratified. 

Thus,  in  a  newly  settled  country  of  great  fertiMty, 
visages  are  high,  because  a  vast  amount  of  land  is  open 
to  cultivation,  and  a  proprietor  can  afford  to  give  a  bigh 
price  for  labor.  Still,  industry  is  not  active  in  propor- 
tion to  the  rate  of  wages,  because,  the  desires  which 
can  be  gratified  in  a  new  country  are  few,  and  a  man  can 
procure  all  that  is  attainable  with  a  less  amount  of  labor 
than  he  ;~  able  to  exert.  Hence,  the  reason  why  men 
labor  so  intensely  in  pios|)erous  seasons,  in  large  cities. 
The  remuneration  at  such  times  is  high,  and  the  desires 
which  wealth  can  gratify  are  innumerable.  A  merchant 
in  New  York,  during  the  season  of  business,  when  prof- 


'  RATIO  OV    CAPITAL  TO  LABOR.         125 

its  are  high,  will  cheerfully  Jmporic  upon  hiiuself,  hihor, 
which  he  knows  will,  ni  all  prohahility,  ruin  his  constiiu- 
tinn  ;  lahor,  which,  he  would  not,  on  any  account,  im- 
pose upon  a  slave. 

Hence,  we  see  that  the  accunuilalion  of  caj)ital  is 
more  for  the  advantage  of  the  laborer  than  of  the  capi- 
talist. The  greater  the  ratio  of  capital  to  labor,  the 
greater  will  be  the  share  of  the  product  that  falls  to  the 
laborer.  The  greater  the  ratio  of  labor  to  capital,  the 
greater  will  be  the  share  of  the  product  that  falls  to  the 
capitalist.  Hence,  the  laboring  classes  are  really  nioi'e 
interested  in  the  increase  of  the  capital  of  a  country, 
than  the  wealthy  classes.  Hence,  when  one  class  of 
the  community  repine  at  the  prosperity  of  another  class, 
they  repine  at  their  own  mercies,  and  the  means  of  in- 
creasing their  own  rate  of  compensation. 

It  is,  however,  evident,  that  the  accumulation  of  capi- 
tal, in  any  nation,  does  not  depend  simply  upon  its  annual 
production,  but  u[)on  the  j)roportion  that  its  annual  j)ro- 
duction  bears  to  its  annual  expenditure.  A  country  that 
annually  expends  all  its  production,  let  it  produce  ever 
so  much,  will  jiever  increase  its  capital.  A  country  that 
pioduces  ever  so  little,  if  it  annually  expend  somewhat 
less  than  its  revenue,  will  be  accumulating  something  ; 
and  must,  in  progress  of  time,  become  richer  than  its 
more  highly  favored  neighbor.  This  explains  the  fact, 
that  the  countries  blessed  with  the  richest  soils,  and  die 
greatest  natural  advantages,  have  not  generally  become 
the  richest.  The  result  has,  within  moderate  limits, 
been  almost  the  reverse. 

Hence,  we  see,  that  every  mode  of  unnecessary  e.v 
penditure,  whether  individual  or  national,  by  dimini.ihiiig 
the  annual  accumulation  of  capital,  tends  directly  to 
lower  the  rate  of  wages,  and  thus  injure  the  condition  of 
the  laboring  classes.  The  millions  which  are  wasted, 
and  destroyed  by  intemperance,  if  saved,  would  add  to 
the  capital  of  a  counlr}',  and  thus  increase  the  demand 
for  labor.  All  unnecessary  expenditure,  for  tlie  main- 
tenance of  civil  government,  has,  of  course,  the  same 
tendency.  Hence  arises,  also,  one  of  the  most  afflicting 
11* 


126  INTELLECTUAL    IMPROVEMENT. 

consequences  of  war.  Had  the  almost  incalculable  sums 
which  Great  Britain  has  expended  in  wars,  for  the  last 
hundred  years,  been  added  to  her  operative  capital,  and, 
but  for  these  wars,  it  would  have  been  so  added,  all  her 
inhabitants  would  have  found,  at  all  times,  abundant  em- 
ployment, and,  at  a  rate  of  wages,  which  would,  by  this 
time,  have  banished  almost  the  recollection  af  poverty 
from  her  shores. 


SECTION  V. 

INDUSTRY  WILL  BE  APPLIED  TO  CAPITAL,  IN  PROPOR- 
TION TO  THE  INTELLECTUAL  IMPROVEMENT  OF  A 
PEOPLE. 

Intellectual  cultivation  tends  to  increase  the  industry 
of  a  people,  in  two  ways.  1st.  By  exciting  a  people 
to  exertion  ;  and,  2d.   By  directing  that  exertion. 

1.  Intellectual  cultivation  excites  a  people  to  exertion. 
Ignorant  men  are  indolent,  because  they  know  neither 
the  results  that  may  be  accomplished,  nor  the  benefits 
that  may  be  secured,  by  industry.  This  is  one  of  the 
most  common  causes  of  the  great  indolence  of  savage 
nations.  An  Indian,  who  knows  of  no  condition  better 
than  his  own,  of  no  covering  better  than  a  skin,  of  no 
habitation  better  than  his  wigwam,  and  of  no  weapon 
better  than  his  bow  and  arrow,  has  no  motive  to  industry, 
beyond  what  may  be  adequate  to  procure  these  sim])le 
necessaries.  Let  him  know  that,  by  additional  eilbrt, 
he  can  provide  himself  with  a  blanket,  and,  by  a  still 
additional  eflbrt,  that  he  can  exchange  his  bow  and  ar- 
-row  for  a  ride,  and  his  wigwam  for  a  comfortable  house, 
and  you  present  motives  to  additional  labor.  His  indus- 
try will  thus  exi)and  with  the  occasion.  The  case  is 
ihe  same  with  a  nation,  at  a  more  advanced  period  of 
its  history.  Hence,  the  imj)ulse  which  is  always  given 
to  industry,  by  any  in)portant  inq)rovement  in  the  intel- 


INTKLLKL  Ib'AL     I  Ml'K  0  ^' i:  M  E.NT.  127 

lectual  character  of  a  p.iojjle.  It  was  a  knowledge  of 
the  coiiveniences  and  liixuiies  of  the  Mast,  which  the 
crusaders  broiigiit  back  to  western  Europe,  that  was  the 
precursor  and  the  cause  of  that  dawning  of  iniproveincnt 
which  succeeded  llie  night  of  the  dark  ages. 

2.  Inlellectual  cultivation  directs  to  a  profitable  end, 
the  industry  whicli  it  lias  previously  excited. 

^Agriculture  will  be  successfully  prosecuted,  only  in 
proportion  as  men  are  acquainted  with  the  best  modes 
and  seasons  of  culture,  the  laws  of  vegetable  and  ani- 
mal physiology,  and  the  probable  existence  of  that  de- 
mand which  it  will  be  most  profitable  to  supply. 

Jtlanufacturing  labor  w-ill  be  successful,  in  proportion 
a?  the  manufacturer  is  able,  by  his  knowledge,  to  avail 
himself  of  the  improvements  of  other  countries,  to  un- 
derstand the  laws  of  nature,  and  invent  means  of  apply- 
ing them  to  his  own  advantage,  and  as  he  is  able,  by  his 
intelligence,  to  modify  his  occupation  in  any  manner  that 
may  be  for  his  interest. 

The  JMerchant  will  be  successful  in  proportion  as  he 
is  able  to  select  the  most  profitable  places  and  times  for 
exchange,  to  foresee  the  probable  alternations  of  the  fhar- 
ket,  and  to  avail  liimself  of  the  fluctuations  of  capital 
which  are  always  taking  place,  in  various  parts  of  the 
civilized  world. 

And,  in  general,  it  is  evident  that,  with  a  given  amount 
of  labor  and  of  capital,  production  will  be  exactly  in 
proportion  to  the  knowledge  which  the  operator  pos- 
sesses of  the  laws  which  govern  that  department  in  which 
he  labors,  and  to  the  degree  in  which  his  labor  conforms 
to  his  knowledge.  If,  then,  labor  will  be  in  propoition 
l(»  the  benefits  which  it  confers  ;  and  if,  bv  knowledge, 
•hcse  benefits  are  increased,  we  see  in  what  manner  labor 
inuSt  be  stimulated  by  intellectual  cultivation.  Thus  wo 
see  how  it  is,  that  an  intelligent  people  is  always  indus- 
trious, and  an  ignorant  people  always  indolent.  Hence, 
one  of  the  surest  means  of  banishing  indolence,  is  to 
banish  ignorance  from  a  country. 

But,  it  is  evident,  tliat  improvement  in  kuuuledge,  in 
order  to  be  in  an^-  signal  degree  beneficial,  must  be  uni' 


128  INTELLECTUAL    IMPROVEMENT. 

versal.  A  single  individual  can  derive  but  little  advan 
tage  IVoiii  ills  Icnowledge  and  industiy  if  he  be  surround 
ed  by  a  couinumity  both  ignorant  and  indolent.  In  jusl 
so  fai  as  other  men  improve  their  condition,  and  become 
useful  to  themselves,  they  become  useful  to  him  ;  anu 
bodi  parties  thus  become  useful  to  each  other.  This  is 
'specially  the  case,  where  a  government  is,  in  its  charac- 
ter, popular  ;  that  is,  where  laws  emanate  from  the  more 
numerous  classes.  In  such  a  case,  not  only  is  an  intel- 
ligent man  not  benefited,  but  he  is  positively  injured,  by 
the  ignorance  and  indolence  of  his  neighbors.  Hence, 
the  reason  why  every  man  has  a  personal  interest  in  the 
intellectual  improvement  of  every  one  of  his  fellow  citi- 
zens ;  and  why  the  education  of  the  whole  population 
should  be  the  care  of  the  government ;  that  is,  of  the 
whole  country. 

The  efforts  of  a  government  maybe  usefully  directed, 
in  this  respect,  to  two  ol)jects.  1st.  The  increase  ;  and 
2d.   The  dissemination  of  knowledge. 

First.  The  increase  of  knoivledge.  This  may  be 
promoted  in  several  ways. 

I.  By  the  establishment  of  colleges,  universities,  and 
other  seminaries  of  learning.  These,  I  suppose,  should 
be  furnished  by  the  public,  with  libraries,  aj)j)aratus,  and 
all  the  means  for  instruction,  investigation,  and  discovery. 
They  should  be  so  governed,  and  the  remuneration  so 
adjusted,  that  teachers  should  be  placed  under  the 
strongest  stimulus  to  labor  for  the  promotion  of  science, 
and  to  communicate,  most  successfully,  knowledge  to 
their  pupils.  Colleges  and  universities  should,  at  all 
times,  be  j)laces  of  strenuous  effort,  and  vigorous  men- 
tal discipline,  on  the  part  of  both  instructors  and  ))upils. 
As  soon  as  tiiey  become  the  places  of  literary  leisure, 
ann  intellectual  indolence,  they  are  not  only  useless,  but 
hurtful ;  inasmuch  as  they  retard,  rather  than  advance, 
the  jjrogress  of  science. 

For  this  reason,  I  doubt  whether  endowments,  for  the 
support  of  professoiships,  are  useful  ;  at  least,  whenever 
they  render  a  teacher's  support  independent  of  his  own 
exertions.     For  the  same  reason,  a   teacher  should  not 


INTELLECTUAL  IMPROVEMENT.        12& 

be  remunerated  by  a  fixed  salary,  but  by  tbe  sale  of 
tickets  of  admission  to  his  lectures,  or  by  a  salary,  vary- 
ing with  his  ability  and  success.  Large  foundations  for 
the  support  of  students  in  colleges,  if  under  the  control 
of  the  college  itself,  so  far  as  they  render  the  number 
of  students  in  no  way  dependent  upon  the  ability  and 
faithfulness  of  the  instructor,  will  have  a  tendency  to 
remove  from  him  one  of  the  most  valuable  stimulants  to 
industry. 

2.  By  rewarding  those  who  have  been  successful  in 
the  advancement  of  science. 

1.  This  may  be  done,  first.  Directly^  as  by  bestowing 
premiums,  rewards,  grants  of  money,  &c.,  to  thosp  who 
have  made  discoveries  of  pre-eminent  utility.  This  is 
frequently  done  by  the  British  government ;  and,  for 
aught  I  see,  it  is  done  wisely.  In  this  country,  however, 
it  is,  I  believe,  never  practiced.  The  only  rewards 
which  we  ever  confer,  are  for  military  or  naval  service. 
The  propriety  of  those,  1  by  no  means,  in  this  place, 
dispute  ;  yet,  I  think  it  would  be  difficult  to  show,  that 
warriors  are  the  only  benefactors  of  mankind,  or  that 
Whitney  or  Fulton  did  not  deserve  as  well  of  their  coun- 
try, for  the  invention  of  the  cotton  gin  and  the  applica- 
tion of  steam  to  navigation,  as  they  would  have  done, 
had  they  captured  a  fleet  on  the  ocean,  or  routed  a  tribe 
of  Indians  in  the  forest. 

2.  Indirectly,  by  granting  to  those  who  labor  in  sci- 
ence or  invention,  the  right  to  derive  advantage  from 
their  discoveries  or  inventions.  This  is  done  by  laws  of 
copy  and  patent  right.  The  justice  of  this  provision 
we  have  elsewhere  shown.  We  here  see  the  manner, 
in  which,  by  stimulating  intellectual  labor,  by  hope  of 
reward,  it  tends  to  increase  knowledge,  and  hence,  fa- 
cilitate production. 

Secondly.  A  government  may  improve  the  intellect- 
ual character  of  a  people,  by  the  dissemination  of  knowl- 
edge. This  will  be  done,  so  far  as  provision  is  made 
for  the  universal  instruction  of  a  people  in  the  elements 
of  a  common  education.  The  interest  of  every  man 
demands  that  ah  his  fellow  citizens  should  be  able  to 


130  BENEFITS     OF    RELIGION. 

read  and  write,  to  keep  accounts,  to  understand  geogra- 
phy and  thus  possess  the  means  of  self-improvement,  to 
whatever  degree  they  may  be  disposed  to  carry  it. 

The  effect  of  such  a  diffusion  of  knowledge,  has  al- 
ready been  illustrated  at  sufficient  length.  It  will  be 
necessary  here  only  to  allude  to  the  means,  by  which 
this  result  may  be  best  attained. 

1.  As  a  stimulus  to  intellectual  improvement,  proba- 
bly, the  right  of  suffrage  should  be  restricted  to  those 
who  are  able  to  read  and  write. 

2.  Provision  should  be  made,  in  every  neighborhood, 
for  the  education  of  all  children  under  a  certain  age. 

3.  The  expenses  of  this  provision  may  be  borne, 
partly,  by  a  general  fund.  This  fund  should,  however, 
never  defray  more  than  a  portion  of  the  expense  ;  for 
no  man  values,  highly,  what  he  gets  for  nothing.  If  a 
fund  be  raised  for  this  purpose,  great  care  must  be  taken 
tliat  it  be  not  abused. 

4.  Without  a  fund,  the  same  result  will  probably  be 
better  accomplished  by  obliging  every  district,  contain 
ing  a  given  number  of  inhabitants,  to  provide  itself  with 
a  school,  on  penalty  of  a  fine  to  be  paid  to  the  school 
districts  in  its  neighborhood,  for  the  purposes  of  in- 
struction. 

5.  To  complete  this  arrangement,  it  might,  probably, 
be  desirable  that  seminaries  be  provided  for  the  purpose 
of  educating  teachers  for  the  primary  schools.  This 
would  ensure  a  supply  of  instructors,  of  assured  qualifi- 
cations, without  which,  such  a  system  might  not  so  read- 
ily go  into  successful  operation. 

And  now,  to  sum  up  what  has  been  said  :  It  will  be 
seen  that  the  inducements  to  labor,  and,  hence,  of 
course,  the  wealth  and  means  of  happiness,  in  any  given 
coimtry,  must  depend,  principally,  upon  two  conditions 
1st.  The  degree  of  its  intelligence  ;  and,  2d.  The  pu- 
rity of  its  moral  character. 

1 .  On  its  int(3lligence  will  depend  its  knowledge  of  its 
own  advantages,  of  the  laws  of  nature,  and  of  the  means 
by  which  it  may  avail  itself  of  those  laws,  for  the  ]n-oni6- 
tion  of  its  own  happiness.     A  nation  without  knowledge, 


BENEFITS     OF     RKLIGIO.N.  13! 

like  a  blind  man  in  the  garden  of  Eden,  mi^^lii  be  sur- 
rounded with  every  thing  lovely  to  the  e}e  or  delightful 
to  the  taste,  withoul  ever  being  able  to  ascertain,  either 
where  a  single  object  of  desire  was  to  be  found,  or  how 
the  possession  of  it  might  be  secured. 

2.  On  the  moral  character  of  a  nation  depends  the 
justice  of  its  laws,  its  respect  for  individual  right,  ser  u- 
rity  of  propertv.  individual  and  social  virtue,  together 
with  the  industry  and  frugality  which  are  their  invariable 
attendants. 

Of  these  two,  the  latter  is  the  more  important  to 
national  prosperity.  For,  where  virtue,  frugality,  and 
respect  for  right  exist,  riches  will,  by  natural  conse- 
quence, accumulate  ;  and  intellectual  cultivation  will,  of 
necess^ity,  succeed.  But,  intellectual  cultivation  may 
easily  exist,  without  the  existence  of  virtue  or  love  of 
right.  In  this  case,  its  only  effect  is,  to  stimulate  desire, 
and  this,  unrestrained  by  the  love  of  right,  must  eventu- 
ally overturn  the  social  fabric  which  it  at  first  erected. 
Hence,  the  surest  means  of  promoting  the  welfare  of  a 
country  is,  to  cultivate  its  intellectual,  but  especially  its 
moral  character.  Until  this  have  been  done,  no  perma- 
nent foundation  for  a  nation's  prosperity  has  yet  been 
laid.  And,  if  any  One  wil'  take  the  pains  to  examine, 
he  will  find,  that,  other  things  being  equal,  the  wealth, 
Snd  happiness,  and  power  of  every  nation,  are  in  exact 
proportion  to  its  intellectual  and  moral  character. 

And,  here,  it  may  not  be  ainiss  to  add,  that  all  true 
benevolence  may  be  defended,  no  less  upon  principles 
of  political  economy,  than  of  philanthropy.  The  circu- 
lation of  the  Scriptures,  the  inculcation  of  moral  and 
religious  truth  upon  the  minds  of  men,  by  means  of 
Sabbath  schools,  and  the  preaching  of  the  Gospel,  aic 
of  the  very  greatest  importance  to  the  productive  ener- 
gies of  a  country.  The  argument  is  very  short,  but  it 
seems  very  conclusive.  No  nation  can  rapidly  accumu- 
late or  long  enjoy  the  means  of  happiness,  except  as  it 
is  pervaded  by  the  love  of  individual  and  social  right  ; 
but  the  love  of  individual  and  social  right  will  never  pre- 
vail   without  the  practical   influence  of  the  motives  and 


132  BENEFITS     OF     RELIGION. 

sanctions  of  religion  ;  and  these  motives  and  sanctions 
will  never  influence  men,  unless  they  are,  by  human  ef- 
fort, brought  to  bear  upon  the  conscience. 

The  same  principles  will  defend,  upon  economical 
grounds,  tlie  efforts  of  benevolence  on  behalf  of  foreign 
nations.  Intelligence,  virtue,  and  equitable  laws,  will 
have  the  same  effect  upon  other  men,  that  they  have 
upon  us.  They  will  render  men  industrious,  frugal,  arJ 
consequently  rich,  and  raise  them  from  a  savage  to  a 
civilized  state.  Just  in  proportion  as  a  ration  is  thus 
transformed,  are  its  products  increased  ;  the  riches  of 
the  whole  world  are  augmented  ;  the  portion  of  wealth, 
which  falls  to  the  share  of  each  man,  is  rendered  great- 
er ;  and  the  ratio  of  capital  to  labor  is  higher.  Just  as 
a  nation  becomes  intelligent  and  rich,  its  wants  are  mul- 
tiplied, ana  the  means  for  supplying  them  are  provided. 
Hence,  it  becomes  a  better  customer  to  other  nations  ; 
it  gives  an  additional  impulse  to  their  industry  ;  and  it 
re}>ays  them  for  their  products,  with  whatever  God  has 
bestowed  upon  it,  which  will  add  to  the  happiness  of 
others.  Can  any  one  doubt  that  Great  Britain  and 
France  reap  incomparably  greater  advantages  from  each 
other,  in  their  present  condition  of  advanced  civilization, 
than  either  of  them  would,  if  the  other  were  in  the  con- 
dition in  which  it  was  found  by  .Tulius  Caesar  ?  What 
demand  would  Great  Britain  make  upon  the  productions 
of  France,  if  she  were,  at  this  moment,  inhabited  by 
half-naked  savages  ?  Or  again  :  How  much  greater  ben- 
efits does  North  America  confer  upon  the  world,  than  it 
would  if  it  were  peopled  by  its  aboriginal  inhabitants  ? 
How  great  a  stimulus  would  be  given  to  the  industry 
of  the  world,  at  this  time  ;  and  how  greatly  would  the 
comforts  and  luxuries  of  men  be  increased,  if  Africa 
were  peopled  by  civilized  and  christianized  men  ?  Now, 
if  these  thing?  be  so  ;  and  that  they  are  so,  I  sec  not 
that  any  one  can  dispute  :  it  seems  to  me,  that  civilized 
nations  could  in  no  way  so  successfully  promote  their 
own  interests,  as  by  the  universal  dissemination  oi  the 
means  of  education  and  the  principles  of  rehgion 


PROTECTIiNG     DUTIES.  133 


SECTION   VI. 

ON    THE    EFFECTS    OF    DIRECT    LEGISLATION    AS    A 
MEANS     OF    INCREASING    PRODUCTION. 

I  have  thus  far  said  nothing  upon  the  effect  of  legisla- 
tive enactments,  by  means  of  bounties  and  protecting 
duties,  as  a  means  of  increasing  production.  'J'he  rea- 
son is,  that  I  have  not  yet  been  able  to  discover  in  what 
manner  they  produce  this  effect.  Nevertheless,  since 
many  persons  suppose  them  to  be  of  great  importance, 
it  might  seem  that  a  discussion  of  this  subject  was  in- 
complete, if  they  were  passed  over  in  silence.  I  shall 
devote  this  section  to  a  consideration  of  their  effects. 

1.  Duties  of  this  sort  are  to  be  considered  apart  from 
those  levied  for  the  support  of  government,  because 
they  are  either  not  necessary  for  this  purpose,  or  else 
they  are  levied  for  a  different  object.  Thus,  if  five  per 
cent,  on  an  import  be  necessary  to  the  support  of  govern- 
ment, and  ten  per  cent,  be  levied,  in  order  to  favor,  or, 
as  it  is  said,  to  protect  one  branch  of  industry,  the  addi- 
tional five  per  cent,  is  levied  for  a  distinct  object,  aside 
from  that  of  the  support  of  government.  It  is  only  this 
latter  part  of  the  duty  which  we  propose  to  consider ; 
that  is,  so  much  of  the  duty  as  is  levied  for  the  purpose 
of  favoring  one  particular  product. 

2.  Now,  if  such  a  duty  have  any  effect  upon  the. pro 
ductiveness  of  a  nation,  it  must  be  in  one  of  these  ways 
It  must  either  first  increase  th'3  capital  of  a  country  ;  or, 
secondly,  increase  its  number  of  laborers;  or,  third, 
create  a  greater  stimulus  to  labor.  I  think  it  evident, 
from  what  has  already  been  shown,  that  every  condition 
which  affects  protluction,  must  exert  its  influence  in  one 
of  these  three  methods. 

3.  I  think  it  evident,  tliat  legislation  of  this  sort  can- 
not increase  the  capital  of  a  country.  The  capital  of  a 
country,  at  any  moment,  is  its  present  amount  of  annual 
and  fixed   capital.     Now,  a  law  cannot  create  capital  ; 

\2 


134  PROTECTI>'G     DUTIES. 

Since,  if  it  could,  there  would  be  no  necessity  for  an}- 
other  labor  than  that  of  legislation  ;  and,  in  oidv.r  to 
grow  rich,  a  nation  would  have  nothing  to  do  but  meet 
in  public  assembly,  and  spend  its  whole  time  in  making 
and  hearing  speeches,  and  enacting  laws.  1  believe, 
however,  that  this  mode  of  growing  rich,  has  never  been 
found  remarkably  successful. 

If  it  be  said  that,  in  this  manner,  we  shall  attract  foreign 
capital  to  our  own  country,  I  answer  :  this  depends  not 
upon  legislation,  but  upon  the  rate  of  interest,  and  the 
security  of  property.  If  these  conditions  be  more  fa- 
vorable here  than  in  another  country,  capital  will  flow 
hither.  If  they  be  more  favorable  in  another  country 
than  here,  it  will  flow  thither.  The  system  of  Great 
Britain  has  been  exclusive,  but  capital  does  not  go  from 
this  country  to  be  invested  there. 

4.  Legislation  of  this  kind  cannot  increase  the  actu- 
al number  of  laborers.  The  number  of  laborers  is  as 
the  number  of  inhabitants.  Legislation  has  never  been 
supposed  to  have  any  power  to  create  men.  It  is  true, 
population  is  found  always  to  increase  with  the  increase 
of  the  means  of  living  ;  that  is,  with  the  increase  of  the 
productiveness  of  labor.  Population  will  increase  or 
diminish,  just  in  proportion  as  a  laborer  is  able  to  pro- 
cure greater  or  less  wages  for  a  day's  labor;  that  is,  as 
every  thing  is  cheaper  or  dearer.  Whether  the  tenden- 
cy of  duties  is  to  render  productions  cheap,  remains  to 
be  considered.  It  must,  however,  be  evident  to  all, 
that  laws  do  not  create  human  beings  ;  of  course,  they 
add  noihing  to  the  number  of  laborers,  that  is,  of  human 
beings  in  a  country. 

It  may  be  said,  we  may  thus  induce  laborers  to  come 
from  other  countries.  To  this  it  may  be  answered  ;  this 
will  depend  upon  the  wages  of  labor.  If  laborers  be 
better  paid  here  than  elsewhere,  they  will  come  here, 
and  not  otherwise.  Besides,  what  is  called  protection 
changes  only  the  mode  of  labor  ;  that  is,  it  lakes  men 
from  one  mode  of  labor,  to  employ  then  upon  another. 
Suppose,  then,  that  it  attracts  foreign  laborers  to  one 
branch  of  industry  ;  it  deters  those  in  another  branch  of 
industry  from  immigrating.      If,  for  instance,  manuf.ictur- 


PROTECTING    DUTIES.  135 

ers  are  protected,  this  will  t^nd  to  encourage  manufac- 
turers to  iininigrate  ;  but  it  uill,  in  a  correspondent  pro- 
portion, discourage  agriculiurists. 

5.  If,  then,  discriminating  duties  produce  any  effect 
upon  production,  it  must  be  by  stimulating  industry  ; 
that  is,  while  the  amount  of  capital  and  the  number  of 
laborers  remain  the  same,  by  stimulating  men  to  labor 
more  industriously,  and  thus  to  create  a  greater  amount 
of  production  than  they  would  under  other  circumstan- 
ces. This,  1  believe,  is  supposed  to  be  the  way  in 
which  the  system  produces  its  effect.  This  is  the  point 
of  view  in  which  we  shall  now  proceed  to  consider  it. 

The  manner  in  which  this  is  done  is  the  following:  Sup- 
pose a  country  to  be  under  a  free  system,  and  that  every 
one  is  devoting  himself  to  agriculture,  commerce,  or 
manufactures,  as  he  finds  it  the  most  for  his  interest  ;  un- 
der these  circumstances,  there  will  be  a  certain  aveiage 
of  productiveness,  both  of  labor  and  of  capital.  Wool- 
len cloth  can  be  procured,  by  exchange,  for  five  dollars 
a  yard  ;  but  it  cannot,  in  tiie  present  state  of  the  coun- 
try, be  manufactured  for  less  than  ten  dollars  a  yard  ; 
that  is,  capital  and  labor  are,  in  every  thing  else,  so  pro- 
ductive, that  they  could  not  be  abstracted  from  other 
employments  at  the  same  rate  of  profit,  unless  the  n)an- 
ufacturer  could  receive  ten  dollars  a  yard  for  his  cloth. 
Now  suppose,  that,  in  order  to  enable  him  to  do  this,  a 
duty  of  five  dollars  a  yard  is  levied  on  imported  cloth, 
by  which  the  price  of  all  cloth  is  raised  to  ten  dollars  a 
yard,  that  it  may  be  in  the  j)ower  of  the  manufacturer, 
to  employ  his  caj)ital  and  labor  in  this  manner.  There 
IS  no  doubt  that  thus  the  manufacture  of  cloth  might  be 
established. 

Now  I  think  it  evident,  upon  insjiection,  that  the  pro- 
ductiveness of  labor  is  not,  by  this  operation,  increased. 
The  reason  why  cloth  was  not  manufacuired  before, 
was,  that  the  productiveness  of  labor  and  capital,  in  this 
mode  of  investment,  was  lower  than  the  average  produc- 
tiveness of  labor  and  capital  in  other  modes  of  invest- 
ment. All  that  has  been  effected  is,  to  raise  the  pro- 
ductiveness   here    to    the    general    average    elsewhere. 


136  PROTECTING    DUTIES. 

There  has  been  nothing  done  to  render  it  anygreatei, 
either  in  this  or  in  any  other  eniploynient  ;  for  1  presume 
that  no  one  will  contend,  that  one  kind  of  industry 
should  be  really  more  highly  paid  than  another  ;  nor  that, 
if  it  were  desired,  it  could  be  etiected  without  the  aid 
of  a  direct  monopoly. 

But  the  manufacturer  now  gets  ten  dollars  for  that 
which  before  would  bring  only  five.  Let  us  inquire 
whence  this  additional  five  dollars  comes. 

It  is  evident  that  government  possesses  nothing.  All 
that  it  possesses  is  precisely  so  much  taken  from  the  an- 
nual revenue  of  individuals.  In  this  case,  therefore,  it 
really  bestows  nolhmg,  but  only  causes  a  transfer  of  an- 
nual revenues,  from  one  party  to  another^^  The  case  is, 
therefore,  the  same  as  it  would  be  if,  while  there  had 
been  no  duty  imposed,  every  man  had  been  allowed  to 
buy  cloth  for  five  dollars  a  yard,  but  had  been  obliged, 
for  every  yard  that  he  bought,  to  pay  five  dollars  to  the 
manufacturer.  It  would  be  'the  same  thing  to  both  par- 
ties as  at  present.  The  consumer  would  then,  as  now, 
pay  ten  dollars  a  yard  for  cloth,  and  the  manufacturer 
might  sell  it  for  five,  if  he  received  five  more  as  a  gra- 
tuity. Tlie  five  dollars  that  have  been  added  to  the 
revenue  of  the  one,  are  precisely  five  dollars  taken  from 
the  revenue  of  the  other. 

Now  if  this  be  the  fact,  inastT)nch  as  what  is  added  to 
the  productiveness  of  the  industry  of  the  one  class,  is 
taken  from  the  productiveness  of  the  industry  of  the 
other  class,  it  would  seem  that  what  the  one  has  gained 
the  other  has  lost  ;  and  hence,  that  there  can  be  no  in- 
creased stimulus  to  industry  on  the  whole,  since,  by  as 
much  as  the  one  is  stimulated,  the  other  is  depressed. 
But  this  is  not  all.  What  you  have  given  to  the  one 
class  has  only  raised  his  inode  of  labor  to  the  point  of 
productiveness  at  which  that  of  all  the  other  classes  ex- 
isted before  ;  while  the  means  by  which  this  has  been 
cfTected,  has,  to  the  whole  amount  of  its  effect,  reduced 
the  productiveness  of  all  the  other  classes  lower  than  it 
was  before.  By  just  as  much  as  this  productiveness  has 
been  diminished,  by  so  much  has  the  stimulus  to  indus- 
try been,  upon  the  whole,  decreased 


PROTECTING     DUTIES.  137 

But  secondly  ;  As  the  price  of  tlie  article  is  ijicreas- 
ed,  the  demand  for  the  article  n  diininisl)ed.  This  has 
been  before  ilhistrated.  There  will,  therefore,  be  less 
of  the  article  produced,  because  less  of  it  is  wanted. 
By  all  this  diininulion  is  the  demand  for  labor  diminish- 
ed ;  the  price  of  labor  must,  therefore,  fall,  and  the  stim- 
ulus to  labor  be^  by  so  much^  decreased. 

This  effect  will  take  place,  in  vv'hat  manner  soeVer  the 
discriminating  duty  may  operate.  Suppose,  that  from 
scarcity  of  wool,  the  [)rice  of  imported  cloth  had,  with- 
out any  duty,  been  doubled  .''  The  result  would  have 
been,  that  the  demand  would  so  liave  fallen  off,  that  mul- 
titudes would  have  been  thrown  out  of  employment,  and 
whole  establishments  would  have  been  ruined.  Sup- 
pose that,  by  a  duty,  we  exclude  the  foreign  cloth,  and 
make  it  ourselves,  but  at  double  the  price.  There  will 
be  a  less  quantity  made,  than  before.  But  the  imported 
cloth  was  not  to  be  had  for  nothing.  Some  of  our  own 
population  were  obliged  to  raise  the  products  which  we 
sent  in  exchange  for  it.  As  we  do  not  take  their  cloth, 
they  cannot  take  our  produce.  Of  course,  all  those 
who  labored  in  the  products  which  ivere  exchanged  for 
cloth,  are  out  of  employment.  There  was  a  demand  for 
a  sufficient  amount  of  their  labor  to  purchase  one  thou- 
sand bales  of  cloth  ;  suppose,  now,  there  is  a  demand 
for  labor  sufficient  to  make  only  five  hundred  bales  of 
cloth.  Ry  all  the  difference,  therefore,  between  the  la 
bor  necessary  to  procure  one  thousand  bales  by  ex- 
change, and  that  necessary  to  manufacture,  or  procure 
by  exchange,  five  hundred  bales,  is  the  demand  for  in- 
dustry diminished,  and,  of  course,  the  stimulus  to  in- 
dustry weakened. 

We  see,  then,  what  is  the  tendency  of  a  system  of 
this  kind,  f^irst,  so  far  as  the  manufacturer  is  con- 
cerned, it  cannot  increase  his  profit  beyond  the  average 
profits  of  every  other  employment  ;  for,  if  comj)etition 
be  allowed,  capital  and  labor  will  flow  into  it,  whatever 
may  be  its  advantages,  until  its  profits  fall  to  the  general 
level.  Secondly,  the  demand  for  other  labor  is  dimin- 
ished by  the  reduced  consumption  created  by  a  rise  of 
12* 


138  PROTKCTING     DUTIES. 

price,  and  also,  as  this  rise  of  price  iiicreascs  the  ex- 
penses of  hving,  it  makes  even  these  reduced  wages  of 
less  value  than  they  were  before.  Plence  the  tendency 
is,  to  reduce  the  [)rofit  of  capital  and  of  labor  in  the 
vy'hole  community  lower  than  they  were  before  such  duty 
was  imposed.  To  this  reduced  average,  manufacturers 
must  themselves  conform  ;  and  hence,  by  this  very  op- 
eration, they  themselves  must  suffer.  Hence  we  see  the 
reason  why.  when  once  a  duty  is  imposed  for  the  pro- 
tection of  a  particular  branch  of  manufactures,  it  is  not 
long  before  a  larger  protective  duty  is  demanded  ;  and 
also  why  a  protective  duty,  which  at  first  is  followed  by 
great  manufacturing  enterprise  and  success,  is  so  com- 
monly afterwards  followed  by  so  universal  a  depression 
of  manufacturing  industry. 

This  is  the  result,  so  far  as  the  effect  upon  our  own 
country  is  concerned.  But  this  is  not  all.  A  rise  of 
prices  must,  of  necessity,  follow  a  protecting  duty  ;  for 
this  is  its  very  object.  ,  Its  object  is,  to  raise  the  price 
of  some  particular  product,  so  that  it  may  be  created 
where  it  could  not  be  created  before.  If  it  produce  no 
rise  of  prices  it  is  useless.  Now,  a  rise  of  prices  raises 
the  cost  of  production,  and,  by  its  whole  eflect,  must 
raise  the  price  of  every  product  which  we  create.  By 
this  whole  effect,  therefore,  is  our  foreign  market  in- 
jured. If  we  can  raise  cotton  at  ten  cents  a  pound,  and 
bring  it  into  market  as  cheap  as  other  nations,  we  have 
as  good  an  opportunity  as  they  for  selling  it.  If  we  can 
raise  it  at  nine  cents,  we  can  undersell  them,  and  supply 
the  whole  market  ;  or,  if  we  sell  it  at  the  same  price  as 
before,  we  gain  one  cent  more  on  the  pound.  K,  by.  in- 
crease of  the  expenses  of  living,  we  cannot  raise  it  for 
less  than  eleven  cents  a  pound,  they  will  undersell  t«s, 
and  we  shall  be  obliged  to  give  up  the  raising  of  cotton, 
either  jjartially  or  altogether  ;  and  the  industry  engaged 
in  raising  and  transporting  the  cotton,  and  what  we  re- 
ceive in  exchange  for  it,  must  be  either  partially  or 
wholly  thrown  out  of  employment.  Every  one  n)ust 
see,  that  the  manufactures  of  Kngland  could  be  afforded 
mncii  lower      that  is,    would  be  able  much    better    to 


PROTt>CTINu     DUTIES.  139 

compete  with  those  of  otlier  nations,  if,  by  abolishing, 
h(M  duties  on  com,  her  manufactures  could  be  supplied 
with  the  necessaries  of  life  at  half  the  present  cost.  At 
the  same  profit  to  the  laborer  and  ca})itaiist,  her  prod- 
ucts could  be  afibrded  at  a  price  less  than  at  present, 
by  the  whole  amount  of  the  dilference  in  the  exj)enses 
of  living.  By  this  difference,  she  would  both  undersell 
other  nations  and  increase  the  demand  for  her  manufac- 
tures, thus  reaping,  at  once,  a  double  advantage. 

But  once  more  :  It  is  seen  that,  by  such  a  system, 
the  course  of  industry  and  of  capital  in  a  nation,  must 
be  greatly  changed.  Thus,  when  an  article  is  imported, 
one  class  of  producers  must  labor  to  create  the  article 
which  we  exchange-  for  it ;  another  class  must  build 
ships  to  transj)ort  it  ;  and  another  class  must  carry  on 
the  transportation.  By  a  discriminating  duty,  all  these 
classes  must,  either  in  whole  or  in  part,  be  thrown  out 
of  employment,  and  this  capital  be  either  reduced  in 
value,  or  rendered  wholly  useless.  Now  this  is  an  in- 
jury, both  to  the  capitalist  and  the  laborer.  The  prop- 
erty of  the  one  and  the  skill  of  the  other  are  rendered 
useless,  and  by  so  much  is  it  a  total  loss  to  the  country. 
It  may  be  said,  let  them  seek  other  emi)loyments. 
True  ;  they  must  do  this  ;  but  this  renders  it  not  the  less 
true,  that  there  has  been  so  much  loss.  If  a  man's 
house  be  burned  down,  it  is  easy  to  say  to  him,  move 
into  another  house  ;  but  this  does  not  alter  the  f\ict,  that 
his  house  has  been  burned  down,  and  that  he  has  suf- 
fered loss  to  precisely  this  amount. 

But,  suppose  he  turn  to  the  other  emjiloyment.  It 
has  been  sliown  that  the  average  of  profit,  in  this  em- 
ployment, cannot  be  higher  than  the  average  of  profit 
was,  in  the  employment  which  he  left.  He  is  then  no 
better  off  than  he  was  befor3,  and,  in  the  meantime,  he 
has  lost  the  skill  and  capital  which  he  spent  many  years 
to  acquire  ;  and  he  has  lost  them,  not  a?  in  the  case 
mentioned  p.  97,  by  the  progress  of  civilization,  and 
with  the  prospect  of  bettering  his  condition,  but  by  an 
act  of  arbitrary  legislation.  By  all  this  amount  of  de- 
preciation, tiierefore,  is  he  and  of  course,  the  whole 
country,  poorer  by  the  change. 


140  BOUNTIES. 

Of  Bounties.  The  principle  of  bounties  is  the  same 
as  thai  of  discriminating  duties.  The  manner  in  which 
they  are  bestowed,  is  the  following  :  If  a  mauiifactnrer 
cannot  produce  cloth  for  less  than  ten  dollars  a  yard,  and 
the  imported  cloth  can  be  produced  at  five  dollars,  a 
bounty  of  five  dollars  a  yard  is  given  him,  for  every 
yard  he  manufactures,  or  for  every  yard  he  exports. 
The  cloth,  then,  is  sold,  either  at  home  or  abroad,  at 
five  dollars,  and  he  also  receives  five  dollars  as  a  gra- 
tuity. 

The  principal  reasons  urged  above,  apply  to  boun- 
ties. They  are,  however,  less  objectionable,  for  several 
reasons  : 

1.  The  price  of  the  article  is  not  visibly  raised,  and 
the  consumption,  therefore,  on  this  account,  is  not  so 
much  diminished. 

2.  The  encouragement  given,  in  this  manner,  is 
cheaper ;  that  is,  we  pay  only  for  what  is  made,  while, 
by  discriminating  duties,  we  pay  the  same,  whether  any 
thing  be  made  or  not.  We  pay  a  very  heavy  duty  on 
cutlery  in  this  country,  while  not  a  thousandth  part  of 
the  cutlery  used,  is  made  here.  It  would  be  vastly 
cheaper  to  pay  a  bounty  sufficient  to  raise  all  the  cutlery 
made  in  this  country  to  its  present  prices,  and  it  would 
be,  for  aught  I  see,  just  as  good  for  the  cutler.  The 
whole  effect  of  this  mode  of  encouragement  is,  to  pay 
one  man  as  much  more  as  the  bounty  amounts  to,  for 
producing  an  article,  than  we  should  pay  another  man  • 
that  is,  one  man  will  do  it  for  five  dollars,  and  we  en- 
gage another  to  do  it  for  five  dollars,  and  give  him  five 
dollars  besides,  for  the  sake  of  economy. 

I  have,  thus  far,  considered  this  subject  solely  in  re- 
spect to  its  connexion  with  economy  ;  that  is,  as  it  is 
favorable  or  unfavorable  to  production.  It  is,  however, 
obvious,  that  an  entirely  distinct  argument  might  be  con- 
structed on  another,  that  is,  a  moral  ground.  It  might 
be  asked,  by  wliat  right  does  society  thus  interfere  with 
the  proi)erty  of  the  individual  ?  when  did  the  individual 
surrender  this  right  .''  and  how  wise  would  it  be  for  him 
to  surrender  it  }     It  is  in  vain  here  to  urge,  that  society 


OBJECTIONS    CONSIDERED.  141 

has  ilio  right  to  destroy  individual  property,  in  cases  of 
extienie  necessity  ;  because,  in  order  to  render  lliis  plea 
avadable,  it  must  be  shown  that  this  is  a  case  of  extieme 
necessity.  And  besides,  if  society  destroy  indivichiai 
property  in  case  of  extreme  necessity,  it  is  always  bound 
lo  make  good  the  loss  to  the  individual.  1  think  that, 
if  the  protected  interests  were  obliged  to  make  good  the 
loss  which  the  system  inflicts  upon  all  other  interests, 
the  demand  for  protection  would  be  less  urgent  than  at 
present  ;  and  j)rotection  would  be  considerably  less  in- 
jurious. 

But,  as  these  are  questions  of  right,  and  belong  rather 
to  Moral  Philosophy  than  to  Political  Economy,  we 
shall  not,  in  this  place,  discuss  them  any  further. 

But,  in  opposition  to  what  has  been  ofl'ered,  several 
objections  have  been  urged.  It  may  be  proj)er  to  notice 
here,  some  of  those  which  are  most  commonly  ad- 
vanced. 

I.  The  above  argument  is  made  to  turn  upon  produc- 
tion alone,  and  proceeds  upon  the  supposition,  that  the 
prosperity  of  a  nation  depends  upon  the  productiveness 
of  its  industry,  more  than  upon  any  thing  else.  In  or- 
der to  meet  this  view  of  the  case,  it  has  been  said,  that 
procluclinn  is  a  matter  of  no  consequence  to  a  nation's 
prosperity,  and  that,  in  order  to  make  a  nation  rich, 
happy,  and  powerful,  all  that  is  necessary  is,  to  encour- 
age and  stimulate  cnnsumption. 

1.  To  this  it  may  be  answered,  that  this  assertion 
leaves  the  above  argument  untouched,  so  far  as  produc- 
tion is  concerned  ;  that  is,  it  does  not  deny  that  the  ef 
fects  of  discriminating  duties  upon  production,  are  such 
as  we  have  shown. 
.  2.  But  secondly  :  It  a  man  assert  that  (he  wealth  of 
a  nation  is  the  result  of  its  consumption,  and  not  of  its 
production,  he  must  also  assert  that  the  hand  of  the 
prodigal.,  and  not  that  of  the  diligent,  maketh  rich  ; 
iliat  industry  and  frugality  are  the  sources  not  of  tiealth, 
but  of  poverty  ;  that  fire  and  sword,  devastation  and 
murder,  are  national  blessings  ;  that  ice  ought  to  pay 
other  nations,  instead  of  their  paying  «s,  for   spoliations 


142  OBJECTIONS    CONSIDERED. 

of  property  ;  that  incendiaries  should  be  rewarded,  in- 
stead of  being  hanged  ;  and  that  the  way  to  render  a<-'ty 
rich,  happy,  and  [)rosperous,  is  to  reduce  it  to  aslies. 
If  a  man  really  believe  this  ;  I  do  not  say  if  he  assert 
it  ;   his  case  is  beyond  the   reach  of  ratiocination. 

11.  It  has  also  been  urged,  that  the  only  method  of 
rendering  products  cheap,  is  to  encourage  competition  ; 
that  competition  is  the  great  source  of  increased  produc- 
tiveness of  labor,  and  that  to  excite  competition  among 
our  own  manufacturers,  by  means  of  higher  duties,  is  the 
only  sure  method  by  which  to  cause  any  article  of  ne- 
cessity to  be  produced  at  the  lowest  possible  rate. 

To  this  objection  we  reply,  that  the  principle  assum- 
ed is  erroneous  ;  and  that  the  reasoning  in  support  of  it 
is  self -destructive. 

1.  The  principle  assumed  is  erroneous.  Although 
free  competition  is  necessary,  to  reduce  prices  to  their 
natural  rate  ;  yet  beyond  this,  competition,  within  long 
periods,  can  have  no  effect  whatever.  The  price  of 
every  article  is  determined  by  the  cost  of  its  production  ; 
diat  is,  by  the  labor  and  capital  necessary  to  produce  it- 
Its  price  can  be  reduced  in  no  other  manner  than  by 
reducing  this  cost.  U  the  materials  can  be  furnished 
cheaper,  and  it  can  be  produced  by  less  labor,  its  price 
will  fall  ;  but  it  can  fall  from  no  other  cause.  If  it  be  a 
monopolized  article,  the  producer  may,  over  and  above 
a  fair  remuneration  for  his  expenses,  demand  an  exces- 
sive profit.  If  there  be  a  free  competition,  his  profits 
will  be  reduced  to  the  general  average  of  other  ca[)ital 
aiid  labor.  A  competition  which  obliged  a  producer  to 
sell  for  less  than  cost,  would  of  course,  ruin  him,  and 
would  be  a  loss  to  the  community.  Such  is  the  case  in 
times  of  manufacturing  depression,  when  the  producer 
IS  obliged  to  sell  at  a  loss.  These  are  surely  not  times 
of  prosperity.  The  result  of  such  competition  is,  to 
drive  a  j)ortion  of  the  producers  out  of  employment  ; 
a  less  amount  of  the  product  is  created^  competition  is 
diminished,  prices  rise  to  their  natural  level,  and  the 
whole  efi'ect  of  competition  is  at  an  end.  If,  then, 
when  there  is  no  monopoly,  competition,  be    it   ever  so 


OBJECTIONS     CONSIDERED  143 

great,  can  reduce  die  price  of  no  ariicle  permanently 
below  tlie  cost  of  its  production  :  and  tiiat,  by  this  cost 
its  price  will  always  be  determined,  be  the  competition 
whatever  it  nvdy  ;  it  is  evident,  that  the  only  way  in 
which  the  price  of  any  thing  can  be  really  reduced, 
must  be  by  diminishing  the  price  of  the  material  and  la- 
bor employed  in  creating  it  ;  that  is,  by  rendering  every 
thing  as  cheap  as  possible.  And  it  is  also  evident,  ihal 
by  raising  the  price  of  articles  of  consumption  ;  that  is, 
of  the  articles  of  living,  we  shall  also  raise  the  price  of 
whatever  is  produced,  let  the  competition  be  ever  so 
great. 

But,  secondly,  the  argument  drawn  from  the  assertion 
is  self-destructive.  If  it  be  the  fact  that  competition  is 
the  great  and  proper  cause  of  reduction  of  j)rice,  then, 
the  wider  the  competition,  the  greater  will  be  the  reduc- 
tion of  price.  If  this  be  so,  we  should  not  only  open 
our  ports  to  every  other  nation,  but  should  abolish  im- 
port 'duties  altogether,  even  for  the  sake  of  raising  a  rev- 
enue, and  sustain  the  expenses  of  civil  government  al- 
together by  direct  taxation.  It  would,  however,  be  a 
new  mode  of  encouraging  competition,  if  the  citizens  of 
New  York  should  forbid  every  one,  not  a  native  of  that 
city,  to  exercise  the  trade  of  a  carpenter  or  joiner, 
within  the  limits  of  their  jurisdiction.  In  what  manner 
such  an  ant  would  reduce  the  prices  of  house-building,  I 
confess  myself  unable  to  discover. 

1  think,  therefore,  that  the  system  of  discriminating 
duties  cannot  be  defended  on  the  ground  that  they,  bj 
competition,  tend  to  reduce  prices. 

III.  Again  :  It  is  asked,  is  it  not  better  to  laboi  foi 
ourselves,  than  to  have  others  labor  for  us  ? 

I  answer,  undoubtedly.  We  must  labor  for  our^ 
selves,  unless  we  mean  to  live  either  by  begging  or  by 
stealing.  And  this  is  really  the  only  alternative  which 
the  Creator  has  left  us.  On  this  point,  therefore,  there 
is  no  dispute.  It  is  agreed  on  boih  hands,  that  it  is  better 
to  labor  for  ourselves,  than  to  have  others  to  labor  for  us. 

Whatever  either  a  man  or  a  nation  possesses,  except 
by  robbery  or  begging,   must  be   the  pioduction   of  its 


144  OBJECTIONS     CONSIDERED. 

own  labor.  The  question  then,  is,  whether  it  is  better 
for  us  to  receive  a  greater,  or  to  receive  a  less  result 
from  our  labor.  Every  man  must  labor  for  a  coat. 
But  is  it  better  for  him  to  procure  it  by  labor,  for  five 
dollars  a  yard,  or  for  ten  dollars  ?  Is  it  better  that  he 
should,  by  exchange,  earn  it  by  five  days'  labor,  or 
make  it  for  himself,  by  fifteen  days'  labor  .'  He  pro- 
cures it  as  much  by  labor  in  the  one  case,  as  in  the  oth- 
er. I  do  not  see  that  there  can  be  any  question,  in 
which  way  his  labor  can  be  most  profitably  expended. 
If  a  manufacturer  wish  for  oranges,  he  can  procure 
them  m  no  other  way  than  by  labor.  The  question  is, 
whether  he  shall  procure  them  by  labor  in  manufactures, 
or  by  labor  in  raising  them.  In  the  first  case,  a  day's 
labor  will  produce,  by  exchange,  a  hundred  oranges  ; 
in  the  second  case,  it  will  cost  several  days'  labor  tc 
produce  one.  The  question  is,  in  which  way,  by  la- 
bor, can  a  manufacturer,  most  easily,  supply  himself 
with  oranges  .'' 

Upon  this  point,  really  hinges  the  whole  matter  in  dis- 
pute. It  is  clear,  as  has  been  stated,  that  every  thing 
which  we  possess,  either  as  nations  or  as  individuals, 
must  be  the  result  of  labor.  It  is  granted,  however,  in 
every  other  case  but  this,  that  the  greater  the  amount  of 
product  which  we  can  create  by  a  given  amount  of  la- 
bor, the  better  it  is  for  the  producer.  Sup|)ose  the  labor 
of  a  particular  community  to  be  valued  at  a  million  of 
days'  work?  annually,  it  is  certainly  wise  in  this  commu- 
nity to  procure,  by  this  amount  of  labor,  as  large  an 
amount  of  product  as  it  can.  Suppose,  that  by  laboring 
in  those  modes  of  production  for  which  it  has  the  great- 
est facilities,  and  then  by  exchanging  a  part  of  its  prod- 
ucts for  those  of  anollier  country,  it  can  realize  two 
millions  of  dollars'  worth  of  products  ;  but,  by  producing 
every  thing  for.  itself,  it  can  only  realize  a  million  and  a 
half  dollars'  worth.  In  which  case,  I  ask,  is  labor  more 
amply  rewarded  .''  Which  is  the  wiser  method  of  appor- 
tioning its  labor  ?  In  which  way  will  capital  accumulate 
most  rapidly,  and  the  nation  soonest  be  capable  of  man- 
ifacturing  profitably  for  itself  .'' 


OBJECTIONS    CONSIDERF.D.  I4t> 

TV.  But  it  is  said,  although  we  may  be  obliged,  ai 
first,  to  procure  manufactures  at  a  higher  price,  yet, 
having  once  introduced  them,  fhey  will,  in  the  end^  be- 
come cheaper  than  before  ;  and  thus,  our  ultimate  ben- 
efit will  more  than  repay  our  temporary  loss. 

In  order  to  consider  this  objection,  it  will  be  necessa- 
ry to  refer  to  what  we  have  already  remarked  on  the 
nature  of  annual  and  fixed  capital. 

It  is  evident,  that,  in  the  first  stage  of  any  society, 
(here  exists  nothing  but  the  earth  with  its  capabilitie?, 
and  man  to  labor  upon  it.  The  labor  of  man  produces 
an  annual  capital.  If  he  have  been  industrious  and  fru- 
gal, there  will  have  arisen  an  annual  surplus,  which  must, 
of  necessity,  be  transformed  into  fixed  capital  ;  and  it  is 
so  transformed,  for  the  purpose  of  increasing  the  annual 
capital.  Thus,  every  addition  to  the  fixed  capital  for 
this  year,  lays  the  foundation  for  the  investment  of  a 
larger,  amount  in  fixed  capital  for  the  next  year  ;  and 
thus  nations  grow  rich,  and  the  demand  for  fixed  capital 
is  annually  increasing. 

It  is  evident  that  the  investment  in  fixed  capital  will 
be,  firsts  in  those  instruments  themselves,  necessary  for 
the  direct  increase  of  annual  production,  as  ploughs 
fences,  houses,  barns,  &c. ,  and,  secondly^  in  the  ma 
chinery  necessary  to  the  creation  of  these,  and  of  the 
productions  for  annual  consumption  ;  that  is,  it  will  be 
in  manufacturing  establishments.  But,  inasmuch  as  the 
capital  of  a  country  is  at  first  small,  a  nation  will,  ol 
necessity,  at  first  invest  its  annual  surj)lus  in  those  man- 
ufactures which  require  the  least  capital,  and  of  which 
the  price  is  most  enhanced  by  transportation.  As  capi- 
tal increased,  it  would  become  able  to  make  larger  in- 
vestments of  fixed  capital.  Manufactures,  which  it 
would  have  been  impossible  for  it  to  conduct  profitably 
in  its  tenth  year,  it  may  conduct  profitably  in  its  fifii- 
eth  year;  and  what  it  could  not  conduct  profitably  in 
its  fiftieth  year,  it  may  very  profitably  conduct  in  its 
one  hundredth  year.  And  the  reason  of  this  variation 
is  two-fold.  In  the  one  case,  it  di'l  not,  and  in  the 
other  case  it  did,  possess  the  capital  necessary  for  the 
13 


140  OBJECTIONS     COXSIDHRKD. 

investment  in  this  particular  branch  of  manufac^^urps  , 
and,  m  tne  second  phiee,  though  it  possessed  (he  requi- 
site copital,  that  capital  t-oiiid  not  be  taken  iVom  the  em- 
ployments in  which  it  was  at  present  engaged,  and  in- 
vested in  any  thing  else,  without  a  loss,  that  is,  a  dimi- 
nution of  profit.  As  soon,  however,  as  the  most  neces- 
sary investments  have  been  made,  their  annual  product 
will  enable  the  nation  to  commence  something  else.  By 
the  multiplication  of  capital,  the  rate  of  interest  is  di* 
minished  and  a  nation  is  gradually  enabled  to  ])roduce 
for  itself  every  thing  for  which  it  has  the  natural  facili- 
ties. And  hence,  the  time  when  any  manufacture  can  be 
profitably  established,  in  a  country  which  possesses  nat- 
ural advantages  for  it,  is  decided  by  the  amount  of  the 
capital  of  that  country  ;  the  amount  of  annual  invest- 
ment which  it  is  able  to  make  in  fixed  capital  ;  and  on 
the  rate  of  interest  at  the  period  in  question. 

Now,  suppose  that  the  system  of  discriminating  duties 
left  the  means  of  accumulation  unaffected.  In  this  case, 
the  period  of  profitably  producing  the  article  in  question 
would  arive,  at  the  same  time  as  if  no  such  system  had 
been  adopted.  Previously,  therefore,  to  this  time^  the 
article  must  have  been  purchased  by  the  whole  commu- 
nity, at  an  additional  and  unnecessary  expense  ;  since, 
when  this  time  arrived,  in  the  natural  course  of  things, 
the  manufacture  in  question  would  commence,  just  as 
though  nothing  had  been  done,  and  just  as  every  other 
manufacture  had  previously  commenced.  In  this  case, 
then,  I  see  not  that  there  v^ould  be  any  gain.  All  that 
has  been  paid,  therefore,  is  so  much  unnecessary  ex- 
pense, without  rendering  this  kind  of  investment  profit  < 
able  to  the  whole  community,  any  sooner  than  it  would 
have  been,  had  no  such  expense  been  incurred. 

That,  however,  a  discriminating  dut}'^  does  not  in- 
crease productiveness,  that  is,  the  means  of  accumula- 
tion, but  that,  on  the  contrary,  it  diminishes  it,  ha?,  1 
think,  been  already  shown.  Now,  by  just  so  much  as 
it  diminishes  productiveness,  and  of  course  diminishes 
annual  capital,  by  so  much  it  postpones  the  j)eriod,  ai 
which  the  manufacture  in  question  can  be  ])rofitably  es 


ODJECTIONS     CONSIDERED.  147 

lablished.  Hence,  tlie  state  of  the  case  is  this  :  In  the 
present  condition  of  capital  and  labor,  the  manufacture 
of  a  particular  produce  is  unprofitable.  In  order  to 
produce  it  nuw^  instead  of  producing  it  at  a  /«/ej' period, 
we  diminish  the  productiveness  of  all  otlier  labor.  And 
tho  only  efiect  of  this  imposition  which  we  have  laid 
upon  ourselves,  is,  instead  of  hastening  the  period  of  its 
profitable  establishment,  to  postpone  it  to  a  still  more 
distant  period. 

But  this  is  not  all.  We  see  that  all  this  is  done,  and 
nil  this  expenditure  is  incurred,  without  any  certain 
knowledge  of  the  result.  It  cannot  be  certainly  known 
when  the  period  will  arrive,  at  which  the  manufacture, 
in  favor  of  which  we  have  laid  the  discriminating  duty, 
may  be  profitably  commenced,  or  whether,  indeed,  it 
can  ever  be  commenced  at  all.  If  it  can  never  be 
commenced,  we  have  thus  imposed  a  duty  by  which  we 
are  all  made  so  nnich  the  poorer,  without  the  prospect 
of  any  benefit.  And  if  it  may  profitably  be  established 
at  some  future  time,  but  we  know  not  when  that  time 
will  arrive,  we  are  paying  out  our  money  at  random  ; 
that  is,  we  know  not  whether  we  shall  gain  or  lose  by 
the  exchange.  Supi)osing  a  benefit  in  fact  to  result,  it 
is  worth  a  given  sum,  and  no  more  ;  but  we  have  no 
means  of  knowing  whether  the  sum  which  we  pay  is 
only  equal  to  the  benefit,  or  whether  it  is  ten  times 
greater.  Now,  that  it  is  very  possible  for  a  nation  thus 
to  pay  for  an  advantage,  supposing  an  advantage  to  be 
gained,  vastly  more  than  it  is  worth,  is  manifest. 

To  illustrate  the  amount  \\hich  has  been  frequently 
expended  to  gain  this  suj)posed  advantage,  1  subjoin  the 
following  instances  from  the  Edinburgh  Review,  for  Oc- 
lober    r829: 

"  The  French  duties  on  iron,  from  1S14  to  1822, 
have  directed  much  capital  to  the  iron  trade.  In  1818, 
1.140,000  quintals  of  unwrought  iron  were  produced  in 
Fran-e  ;  in  1835,  1,970,000;  in  1829.  2,209,000. 
Thus  far  the  system  has  succeeded. 

On  the  contrary,  as  foreign  iron  is  imported  at  a 
duty  averaging  twenty   francs,   the  price  of  the  whole 


148  OBJECTIONS    CON'SIDKRED. 

2,269,000,  above  what  it  could  have  been  imported  for, 
is,  40,538,800  francs,  the  direct  cost  for  protection. 
This  is  about  £  20  sterhng  a-piece  to  every  person  en- 
gaged in  the  iron  trade.  The  effect  of  these  measures 
is,  to  add  fifty  francs  to  the  price  of  a  plough,  and  to 
render  cotton  machinery  one  third  dearer  than  it  would 
be  if  imported.  The  price  of  charcoal  has  been  doubled 
or  trebled,  and  from  twenty-five  to  fifty  per  cent,  has 
been  added  to  the  price  of  iron  and  wood.  So  great  is 
ihe  injury  to  other  branches  of  production. 

And  yet  the  iron  trade  is  depressed.  This  is  owing  to 
(he  fact,  that  too  great  a  portion  of  capital  has  been  di- 
rected to  the  iron  trade  ;  and  also  to  the  increased  price 
of  charcoal.  It  must  also  necessarily  follow,  from  what 
has  been  said  above,  that  this  pressure,  which  has  been 
brought  upon  other  branches  of  production,  must  reduce 
the  average  ratio  of  profit  ;  and  to  this  average  the  iron 
trade  must  sink,  as  well  as  every  thing  else.  Here  there 
is  an  injury  done  to  every  other  branch  of  business,  and 
yet  the  iron  business  is  not  at  the  average  rate  of  profit  ; 
that  is,  it  is  depressed.  There  is  a  great  annual  loss  ;  but 
where  do  we  see  the  prospect  of  a  subsequent  benefit .'' 

Tke  sugar  trade.  To  encourage  her  colonies,  France 
lays  a  duty  of  fifty  francs  per  quintal,  on  all  foreign 
sugars.  This  has  increased  the  quantity  made  at  home 
and  at  her  islands.      So  far  it  has  succeeded  ;  but, 

2.  The  difference  between  the  duty  on  foreign  and 
the  duty  on  her  own  sugars,  amounts  to  32,945,000 
francs.  This  is  the  bounty  paid  to  the  sugar  growers 
of  Martinique  and  at  home. 

3.  The  quantity  of  sugar  consumed  is  probably  less 
by  one  third,  than  it  would  otherwise  be.  England, 
with  half  the  number  of  inhabitants,  consumes  two  and 
a  half  times  as  much  sugar  as  France. 

4  But  it  is  said,  that,  by  this  means,  beet-root  sugai 
will  yet  supply  France  at  the  ordinary  price.  It  must, 
however,  take  twenty  years,  under  the  present  system, 
in  order  to  do  this.  The  present  protection  costs 
£  1,400,000  per  annum.  Suppose  this  to  continue  for 
twenty  years,  it  will  amount  to  X  28,000,000  sterling, 


OBJF.CTIONS    CONSIDF.RED.  149 

the  interest  of  which,  at  five  per  cent.,  will  huy,  nt  two 
tnd  a  half  pence  per  pound,  126,000,000  pounds  of 
sugar  per  aniuun  ;  or  nearly  the  whole  annual  amount 
of  sugar  now  consumed  in  France. 

77(6  Cotton  JManufacture.  By  pushing  forward  those 
products  for  which  she  has  no  capahilities,  she  has  di- 
minished those  to  which  siie  is  adapted.  Countries 
which  formerly  bought  of  her,  now  that  she  refuses  lo 
receive  their  products,  refuse  to  receive  hers.  Hence, 
the  exports  of  wine,  her  natural  product,  have  fallen  off. 

Before  the  Revolution,  her  exj)ort  of  wine  averaged 
100,000  tons  per  annum.  Since  1820,  it  has  varied 
from  39,000  lo  03,000  tons.  The  result  upon  her  silk 
trade  has  been  the  same.  She  has  obliged  other  na- 
tions  to  raise  silk  for  themselves."  * 

Such  are  some  of  the  certain  evils  of  such  a  S3'^stem. 
These  surely  ought  not  to  be  voluntarily  imposed  upon 
ourselves,  without  equal  certainty  of  future  benefit,  and 
a  benefit  so  much  superior  to  that  which  we  should  oth- 
erwise have  reaped,  as  to  compensate  us  for  all  the  evils 
and  expenses  which  we  impose  upon  ourselves.  And 
if  it  do  no  more  than  this,  we  are  the  losers,  by  all  the 
cost  of  tlie  agency  for  doing  that  which  would  as  well 
have  been  done  without  us.  But,  if  the  system  itself 
do  nothing  towards  hastening  the  time  of  profitable  in- 
vestment in  manufactures,  then  it  is  an  immediate  and  a 
very  great  and  wide-spreading  evil  at  present,  and  it 
tends  to  nothing  but  evil  for  the  future. 

V.  [t  is  said,  that  it  is  frecpiently  expedient  to  impose 
a  duty  as  a  measure  of  retaliation.  The  case  is  this. 
A  nation  will  not  receive  our  products,  and  we,  in  order 
to  punish  her,  and  thus  oblige  her  to  change  her  policy, 
refuse  to  receive  hers.  Let  us  proceed  dispassionately, 
but  bricfiv,  to  consider  this  argument. 

1.    Is  retaliation  a  virtuous  or  an  honorable  motive  to 
action  }     Do  we  not  consider  it  vicious  and  mean  in  an 
individual  .''  Can  it  be  otherwise  in  a  nation  .''  The  pre 
gumption  must  surely  be  adverse  to  a  course  of  conduct, 

»  I  have  in.-irked  the  above  passago  as  a  quolation,  allhnugh  I  have 
abridged  the  extract,  wilhoiH  giving  the  exact  words. 
13* 


150  OBJECTIONS    CONSIDERED. 

which  is  a  manifest  departure  from  elevated  moral  prin 
ciple. 

2.  Is  retaliation,  in  the  intercourse  between  man  and 
man,  generally  wise  ?  Do  we  not  commonly  oDserve, 
ihat  it  leads  men  to  headlong  vindictiveness,  which  is  as 
hkely  to  injure  themselves  as  their  opponent  ? 

3.  Our  object  is  to  distress  the  other  country  until  we 
oblige  her  to  alcer  her  policy  and  receive  our  products. 
But  will  this  appeal  to  her  fears  be  as  likely  to  produce 
the  change  which  we  desire  as  setting  her  the  example 
of  manly  generosity  ?  Of  all  means  that  can  be  con- 
ceived, a  threat  is  the  least  likely  to  produce  effect  upon 
large  masses  of  men. 

4.  But  if  we  resolve  to  injure  our  neighbor,  let  us 
•see  that  we  do  not  too  much  injure  ourselves,  and  thus 
render  her  enmity  still  more  elTective. 

She  refuses  our  products,  and  we  retaliate  by  refusing 
hers.  Now  we  can,  by  exchange  with  other  nations, 
procure  her  products  at  a  cheaper  rate  than  we  can 
manufacture  them  ourselves,  or  we  cannot.  If  we  can- 
not, then  a  duty  is  unnecessary,  since  we  shall,  in  that 
case,  of  course,  produce  them  ourselves.  If,  in  conse- 
quence of  the  obstacles  which  Great  Britain  opposed  to 
the  reception  of  our  raw  material,  her  cottons  were 
raised  in  price  as  high  as  those  manufactured  here,  we 
should  exclude  them  immediately  by  our  own  products. 
If,  on  the  other  hand,  by  means  of  a  double  exchange, 
we  can  procure  them  cheajier  than  we  could  j)rocure 
them  in  any  other  manner,  it  would  be  for  our  interest 
thus  to  procure  them.  Because  another  nation  wishes 
to  injure  us,  there  is  no  reason  why  we  should  injure  our- 
selves. We  surely  injure  ourselves  when  we  pay  a 
dollar  for  an  article  when  we  could  get  it  just  as  well  for 
seventy-five  cents. 

And  besides,  it  is  said,  we  wish  to  become  indepen- 
dent of  the  other  nation.  Tiue  ;  but  how  shall  we  be- 
come indci)cndent  of  her.  Clearly  by  becoming  wealthy 
and  powerful.  But  the  way  to  wealth  and  power  is, 
Burely,  to  buy  ishere  we  can  buy  on  the  best  terms,  and 
sell  where  we  can  sell  on  the   best  terms.     We  thus 


OBJECTIONS     COiNSIUERED.  151 

shall  the  most  rapiilly  uccuinulutc  weaUh,  and  increase 
our  po|)ulation,  and  thus  most  readily  shall  we  be  able 
to  compete  wiUi  the  manufactures  of  any  otlier  nation. 
The  question,  then,  seems  to  be  simply  this.  Shall  we 
diminish  our  own  happiness  for  the  sake  of  diminishing 
the  happiness  of  another  ?  or  shall  we,  deaf  to  the  insti- 
gations of  vindictiveness,  and  irrespective  of  the  effect 
upon  others,  promote  our  own  happiness  by  every  means 
hi  our  power  ?  Or  still  further,  if  we  resolve  to  punish 
our  neighbor,  would  it  not  be  worth  while  to  a'sk  what 
it  will  cost  ;  and  whether  we  are  willing,  for  the  sake  of 
retaliation,  to  pay  several  millions  of  dollars  annually. 

To  all  this,  it  is,  finally,  objected,  that  a  government 
having  adopted  a  restrictive  system,  and  having  thus 
obliged  persons  formerly  engaged  in  other  branches  of 
industry  to  embark  in  manufactures,  is  under  moral  obH- 
gation  to  continue  that  protection  ;  at  least  so  long  as  to 
enable  the  manufacturer  to  change  his  mode  of  employ- 
ment without  injury.  To  this  objection  I  have  no  de- 
sire to  make  any  reply.  It  is  a  question  of  morals,  and 
not  of  political  economy.  Whatever  the  government 
has  directly  or  indirectly  pledged  itself  to  do,  it  is  bound 
to  do.  But  this  has  nothing  to  do  with  the  question  of 
the  expediency,  or  inexpediency,  of  its  having,  in  the 
first  instance,  thus  bound  itself;  nor  with  the  question 
whether  it  be  not  expedient  to  change  its  system  as  fast 
as  it  may  be  able  to  do  so,  consistently  with  its  mora] 
obligations. 

For  these  reasons,  I  do  not  believe  that  the  direct 
efforts  of  government  are  to  be  numbered  among  the 
means  for  encouraging  the  application  of  labor  to  capital. 
Their  good  effect,  if  it  exist,  must,  therefore,  be  sought 
for,  not  in  their  effect  upon  production,  but  upon  some- 
thing else. 

But  it  may  be  asked,  can  a  government  do  nothing  to 
piiiniote  the  industry  of  a  people,  and  to  increase  the 
amount  of  their  production  ?   I  answer  ;  they  can  do  much. 

1.  They  can  enact  wise,  wholesome,  and  equitable 
laws,  and  thus  protect  the  iadividual  in  the  exercise  of 
his  right  cf  person  and  property. 


152  OBJECTIONS    CONSIDERED. 

2.  They  can  do  much  to  accoiiiplish  the  universal 
diflusion  of  the  means  of  knowledge,  by  the  jtiomotion 
of  education  among  all  classes  of  the   people. 

3.  They  can  do  much  for  the  promotion  and  exten- 
sion of  science,  by  fostering  seminaries  of  learning. 

4.  They  can  originate  that  knowledge,  which  must 
otherwise  be  obtained  at  great  individual  expense.      As, 

1.  By  experimental  farms,  of  which  the  results  should 
be  accurately  registered,  and  published  to  the  whole 
community. 

2.  By  experimental  manufactures,  which  might  show, 
from  time  to  time,  what  branches  of  manufacture  could 
profitably  be  introduced  into  a  country,  and  how  they 
might  be  most  successfully  conducted. 

In  tl>is  manner,  much  might  be  done,  and  at  small  ex- 
pense. When  these  means  have  been  tried,  and  have 
failed,  it  will  be  time  enough  to  make  other  and  more 
expensive  experiments. 

5.  They  can  do  much,  by  confining  themselves  to 
their  own  appropriate  duties,  and  leaving  every  thing  else 
alone.  The  interference  of  society  with  the  concerns 
of  the  individual,  even  when  arising  fiom  the  most  inno- 
cent motives,  will  always  tend  to  crush  the  s()irit  of  en- 
terprise, and  cripple  the  productive  energies  of  a  coun- 
try. What  shall  we  say,  then,  when  the  capital  and  the 
labor  of  a  nation  are  made  the  sport  of  party  politics  ; 
and  when  the  power  over  them,  which  a  government 
possesses,  is  abused,  for  the  base  purpose  of  n)inisteiing 
to  schemes  of  political  intrigue  .' 

So  far  as  T  am  able  to  discover,  such  are  the  most 
important  conditions  on  which  the  productiveness  of  any 
society  depends.  They  are  briefly  these  :  Industry  and 
Frxigalitij^  Virtue  and  Intelligence.  Possessed  of  these, 
no  nation,  with  the  ordinary  blessing  of  God,  can  long 
be  poor.  Oestiiute  of  either  of  them,  whatever  be  its 
natural  advantages,  no  nation  can  ever  long  be  rich. 
Patriotiatn,  no  less  than  religion,  would,  therefore,  teach 
us  to  cultivate  these  habits  in  ourselves  and  in  others  ; 
and  he  is  the  purest  patriot  who  cultivates  them  most 
assiduously 


BOOK  SECOND. 


EXCHANGE. 

Exchange,  is  a  transaction,  in  which  two  individu- 
als mutually  and  voluntarily  transfer  to  each  other  the 
right  of  property,  to  a  given  amount,  either  in  capital  or 
labor. 

This  transfer  must  be  both  mutual  and  voluntary  by 
both  parties,  or  else  it  is  robbery  by  one  party.  If 
property,  without  the  right  of  possession,  be  given  in 
exchange,  it  is  fraud.  If  1  give  a  horse  in  exchange, 
which  does  not  belong  to  me,  I  confer  no  right  of  prop- 
erty ;  for  [  have  none  to  confer  ;  since  the  real  owner 
may  reclaim  him,  at  any  moment.  The  exchange  may 
be  either  of  capital  by  both  parties,  as  if  A  and  B  ex- 
change wheat  for  corn  ;  or  of  capital  for  labor,  as  when 
A  gives  B  a  bushel  of  wheat  for  a  day's  labor  ;  or  of 
labor  for  labor,  as  when  A  agrees  to  work  for  B  to-day, 
on  condition  that  B  shall  work  for  him  to-morrow.  Ex- 
change is  of  three  kinds,  viz  : 

I.  Barter  in  general,  or  exchange  in  kind. 

II.  Exchange  by  means  of  a  metallic  currency, 
HI.  Exchange  by  means  of  a  paper  currency. 


CHAPTER  FIRST. 

OF    BARTER    OR    EXCHANGE    IN    KIND. 

SECTION    I. 

OF   THE   PRINCIPLES    IN   THE    PRESENT    CONSTITUTION, 
WHICH    GIVE    RISE    TO     EXCHANGE. 

1.  It  has  been  already  shown,  that  human  labor,  o( 
some  kind,  is  necessary  to  production  ;  that  is,  to  the 
creation  of  whatever  has  the  power  of  gratifying  human 
desire.  Hence,  without  labor,  no  desire  would  be  grat- 
ified ;  that  is,  the  race  would  speedily  perish.  As  we 
have  said  before,  the  law  of  our  being,  imposed  upon 
every  individual,  enacts  that,  by  the  sweat  of  our  face 
we  sliall  eat  our  bread. 

2.  But  by  labor  exerted  upon  any  substance,  in  such 
nanner  as  to  give  it  value,  we  establish  over  that  value, 
either  in  whole  or  in  part,  the  right  of  property.  If  the 
original  capital  were  our  own,  we  possess  that  original 
capital,  together  with  all  the  additional  value,  which  die 
change  that  we  have  effected  has  created.  If,  by  labor 
upon  the  capital  of  another,  we  have  increased  its  value, 
we  establish  a  right  to  a  portion  of  it,  to  be  estimated 
by  the  respective  values  of  the  labor  and  capital  em- 
ployed. Nay,  this  capital  is  nothing  but  the  result  of 
pre-exeit(;d  labor.  So  that  the  capitalist  contributes  his 
past,  ann  the  laborer  his  present  labor,  and  they  share 
the  [)roduct  between  them. 

3.  Hence,  from  the  very  conditions  of  our  being,  the 
act  of  creating  a  value  appropriates  it  to  a  possessor 
This  holds  true  of  every  thing  not  the  spontaneous  gift 
of  God.  Hence,  every  thing  created  by  man,  belongs 
to  some  man  that  is,  he  possesses  over  it  the  right  of 
property.     And  this  right  of  property  h^exclusive  ;  that 


fRINCIPLES   WHICH  GIVE   RISE   TO    EXCHANGE.     li)b 

is,  he  has  the  right  to  use  it  as  he  will,  to  the  exchision 
of  every   man  and  of  all   men.      And,   j)rovided   he   do 
not  interfere  with  the  rights  of  otheis,  no  man  can  inter 
fere  with  his  use  of  whatever   product  he   lias  created, 
without  a  violation  of  moral  law. 

4.  Different  men  are  constituted  by  the  Creator  with 
diffeient  aptitudes  for  different  pursuits,  and  with  differ- 
ent dispositions  towards  those  pursuits.  One  man  is 
adapted  to  investigate,  and  another  to  apply  to  practice, 
the  laws  of  nature,  and  another  to  perform  the  operation 
by  which  those  laws  are  made  to  create  value.  And 
these  aptitudes  are  still  further  subdivided.  One  man  is 
better  adapted  to  investigate  physical,  another  intellec- 
tual, and  another  moral  laws.  Thus,  also,  in  the  various 
pursuits  of  operative  industry,  one  man  prefers  agricul- 
ture, another  manufactures,  and  another  navigation.  And 
it  is  found,  as  might  be  expected,  that  the  disposition 
towards  a  particular  operation,  severally  corresponds 
with  a  man's  aptitude  for  it  ;  that  is,  that,  in  general,  a 
man  is  most  strongly  disposed  to  devote  himself  to  that 
particular  occupation,  for  which  God  has  given  him  the 
greatest  aptitude.  Indeed,  the  disposition,  in  most  cases, 
will  do  very  much  to  create  the  aptitude.  A  man  al- 
ways labors  more  successfully  in  an  occupation  which  he 
Jikes,  than  in  one  which  he  dislikes. 

5.  Hence,  a  great  public,  as  well  as  private  advantage, 
arises  from  every  one's  devoting  himself  to  that  occu- 
pation which  he  prefers,  and  for  which  he  is  specially 
fitted.  Inasmuch  as  he  likes  it  bcst^  he  is  thus  ha)>pier 
than  he  would  be  in  the  pursuit  of  any  other,  livery 
one  thus  being  able  to  do  t,hat  which  he  likes  best,  e\ery 
one  will  derive  from  this  source,  all  the  happiness  which 
it  is  able  to  confer.  And,  inasmuch  as  he  is  better  Jilted 
for  i7,  he  will,  with  the  same  labor,  create  a  greater 
amount  of  value  than  he  will  by  labor  in  any  other  em- 
ployment. He  will  also  create  the  value  nuich  more 
perfectly.  The  annual  amount  of  value,  created  in  a 
community,  will  thus  be  greatly  increased,  with  the  same 
amount  of  labor,  and,  with  a  much  greater  amount  of 
ha|)piness.      If  6very  man  labored  at  that  employment  in 


15G    PRINCIPLES  WHICH   GIVE   RISE   TO    EXCHANGE. 

which  he  could  create  an  amount  of  value  equal  ro  ticen- 
ty,  there  would  be,  by  the  whole  society,  just  twice  as 
much  created,  as  if,  by  changing  occupations,  each  one 
labored  at  that  for  which  he  could  create  a  value  equal 
only  to  ten.  If  all  the  different  classes  of  laborers  were, 
for  a  year,  to  be  obliged  to  exchange  work  with  each 
other,  every  one  can  perceive  that,  for  that  jear,  pro- 
duction would  almost  absolutely  cease. 

6.  Were  this  all,  though  every  man  created  his  own 
particular  value  with  the  greatest  possible  success,  yet 
each  man  viould,  manifestly,  possess  but  one  value.  The 
wheat  grower  would  have  nothing  but  granaries  full  of 
i'^heat ;  the  carpenter,  nothing  but  ranges  of  houses  ;  the 
stone  cutter,  nothing  but  piles  of  stone  ;  and  the  shoe- 
maker, nothing  but  thousands  of  shoes.  But  while  there 
exists  in  every  man,  both  the  aptitude  and  the  disposition 
for  the  creation  of  a  particular  value,  there  exists  equally 
iri' every  man,  a  desire  to  enjoy  every  value  that  can  be 
created.  A  man  may  like  to  create  a  value  of  which  he 
desires  to  use  but  very  little  himself;  nay,  for  which,  in 
itself,  he  perhaps  has  even  less  desire  than  most  other 
men.  The  man  who  is  the  fondest  of  fishing,  may  be, 
hy  no  means,  a  great  lover  of  fish.  He  who  is  the  fond- 
est of  hunting,  may  be,  by  no  means,  the  fondest  of 
game.  No  man  supposes,  because  a  man  is  fond  of  fox- 
hunting, that  he  is  fond  of  fox-eating.  Thus,  we  see, 
that  the  desire  for  the  creation  of  value,  is  one  thing, 
and  the  desire  for  using  the  value  created,  is  another 
The  one  is  limited  to  single  objects,  and  the  other  is  as 
widely  extended  as  the  objects  to  which  it  can  be  direct- 
ed. And  it  is  evident,  that  the  one  form  of  desiie  is 
as  much  intended  to  be  gratified  as  the  other.  He  who 
created  the  desire,  and  also  created  the  object  which 
would  gratify  it,  intended  the  one  for  the  other,  restrict- 
ing Mian  only  to  the  modes  and  degree  of  gratification 
which  he  has  a|)pointefl.  Civilization  and  social  ha|'pi- 
ness  advance,  just  in  proportion  as  the  greatest  number 
of  the  desires  of  man  are  gratified,  in  -conformity  with 
the  lawa  of  the  Creator. 

7.  We  see,  then,  that  man  is  created  with  the  aptitude 


JNATIO.VAL     KXcnA.NCJIi;.  167 

and  the  desire  for  the  creation  of  one  product,  but  with 
the  desire  for  the  eajoijinent  of  a  tJiousand  products,  and, 
that  the  gratificatiou  of  one  of  these  forms  of  desire  is 
as  much  the  intention  of  his  Creator,  as  the  gratification 
of  the  otiier.  He  is  intended  to  produce  one  thing,  and 
to  hold  this  thing  produced,  by  the  riglit  of  property, 
while  at  the  same  time,  every  man  is  intended  to  requn-c, 
for  the  gratification  of  his  desires,  a  thousand  things. 
Now,  it  is  the  existence  of  these  contrary  indications  in 
his  nature,  that  creates  the  necessity  for  exchange  'J'he 
right  to  use  his  product  as  he  pleases,  is  also  the  right  to 
transfer  it  to  wliomsoever,  that  is,  to  exchange  it  with 
whomsoever  he  pleases,  and  for  whatever  he  pleases. 
By  doing  this,  all  the  indications  of  his  nature  are  ful- 
filled.  'Ihe  right  of  property  is  preserved  inviolate. 
Every  one  may  employ  his  own  capital  and  industry  as 
he  pleases,  that  is,  as  will  best  promote  his  own  happi- 
ness, and  also  as  will  add  the  most  abundantly  to  the 
wealth  of  the  whole  community  ;  and,  at  the  same  time, 
by  means  of  the  products  of  his  single  branch  of  indus- 
try, he  may  procure  every  object  of  desire  that  every 
other  man  has  created.  And,  inasmuch,  as  by  division 
of  labor,  on  the  principle  of  which  we  have  spoken,  a 
larger  amount  will  be  created,  and  in  greater  perfection, 
he  will  procure  every  object  at  less  labor,  and  in  more 
perfect  condition,  than  would  be  possible  in  any  other 
manner. 

The  necessity  of  exchange,  therefore,  as  truly  enters 
into  the  conditions  of  our  being,  as  that  of  production. 
Without  exchange,  there  could  be  no  division  of  labor, 
and,  of  course,  only  the  smallest  possible  amount  of 
production.  Without  exchange,  there  would  rarely  be 
any  stimulus  to  labor  ;  for  labor  could  add  but  little  to 
our  means  of  gratification,  beyond  the  most  absolute  ne- 
cessaries of  life.  There  would  be  no  stimulus  to  form 
so(;ieties,  since,  as  man  depended  solely  upon  himself, 
he  might  as  well  be  solitary  as  social.  Hence,  all  pro- 
gress in  civilization  would  be  hopeless,  and  each  genera- 
tion would  tread  precisely  in  the  footsteps  of  that  which 
bad  preceded  it. 
11 


153  NATIONAL    EXCHANGE. 

S.  T  have,  thus  far,  spoken  merely  of  exchange  be- 
tvAeen  the  individuals  of  the  same  society.  I  think  it 
evident,  however,  that  the  same  principles  apply  with 
equal  force  to  the  eKchanges  between  different  societies. 

The  aptitudes  of  diti'erent  nations  for  the  creation  of 
different  products,  has,  in  many  cases,  been  fixed  by 
unchangeable,  geographical,  and  physiological  law.  Cot- 
ton, coffee,  spices,  dye-ijtufis,  sugar,  rice,  and  many  of 
the  most  valuable  fruits  and  medicines,  can  be  cultivated 
only  in  southern  latitudes.  Wool,  wheat,  and  brnad- 
stuifs  generally,  flax,  and  the  most  valuable  animals,  are 
found  only  in  temperate  climates.  Iron  is  found  in  north- 
ern latitudes  ;  and  furs,  hemp,  and  feathers  are  brought 
from  climates  still  further  north.  One  country  is  better 
adapted  to  commerce,  another  to  agriculture,  and  another 
to  manufactures. 

Besides,  as  we  have  already  shown,  a  society,  at  one 
period  of  its  history,  is  better  adapted  to  one  sort  of 
production  than  to  another.  When  capital  is  scarce  and 
land  is  cheap  and  fertile,  a  nation  is  better  adapted  to 
agriculture  ;  when  capital  becomes  abundant  and  land 
dear,  it  becomes  gradually  better  adapted  to  manufac- 
tures ;  that  is  to  say,  nations,  as  well  as  individuals,  both 
by  original  endowment  and  accidental  circumstances, 
have  their  special  adaptations  to  the  creation  of  particu- 
lar products.  I  suppose  it  unnecessary  to  state,  that 
nations,  that  is,  people,  if  left  to  themselves,  are  like 
individuals,  disposed  to  avail  themselves  of  the  peculiar 
advantages  bestowed  u|)()n  them  by  their  Creator.  8elf- 
interest  teaches  them  tiiis  lesson  with  sufficient  clearness, 
and  they  willingly  practise  it,  if  left  to  their  own  natural 
instincts. 

It  is  also  evident  that,  by  each  nation''s  devoting  itself 
to  that  branch  of  production  for  which  it  has  the  greatest 
facilities,  either  original  or  acquired,  its  own  happiness 
will  be  better  promoted,  and  a  greater  anmunt  of  pro- 
duction created,  than  in  any  other  manner.  And  while 
all  nations  thus  appropriate  tlieir  industry,  a  much  greater 
amount  of  annual  value  will  be  created  for  the  whole 
human  race,  than  by  any  change  that  could  possibly  bo 


NATIONAL    EXCHANGE.  l59 

made.  If  Cuba  slioiilil  relinquish  the  raising  of  coffee 
and  sugar,  and  devote  herself  to  the  raising  of  wheat  ; 
and  New  York,  relinquishing  the  culture  of  wheat,  should 
betake  herself  to  the  raising  of  coflee  and  sugar,  would 
not  both  communities  be  jjoorer,  and  would  not  the  price 
of  coffee,  sugar,  and  wheat  be  incieased  over  the  whole 
world  ;  that  is,  would  not  all  the  world,  and  these  coun- 
tries especially,  be  poorer  than  they  are  now  ? 

But,  whilst  it  is  thus  evident  that  every  nation  is  in- 
tended by  the  Creator  to  improve  its  own  advantages, 
that  is,  to  create  that  product  for  the  creation  of  which 
it  has  the  greatest  facilities  ;  it  is  also  the  fact,  that  every 
nation,  and  every  individual  of  that  nation,  desires  tlie 
productions  of  every  other  nation  ;  and  is  happy  in  pro- 
portion as  he  enjoys  them.  What  nation  could  be  happy 
without  the  cotton  of  the  South,  the  hemp  and  iron  of 
the  North,  or  the  wool,  wheat,  and  manufactures  of  tem- 
perate climates  ?  Nay,  let  any  individual  look  at  the 
clothes  which  he  wears,  the  furniture  of  his  room,  or 
the  food  and  utensils  of  his  table,  and  he  will  be  imme- 
diately convinced,  that  every  latitude  of  both  hemis- 
pheres, and  almost  every  country  on  the  globe  are  tribu- 
tary to  his  ha|)piness.  His  own  country  has  peculiar 
adaptations,  but  they  are  adaptations  for  but  few  prod- 
ucts, while  every  citizen  of  that  country  requires  for 
his  convenience,  nay,  almost  for  his  existence,  the  pro- 
duction of  every  other  country.  These  desires  can  be 
gratified  only  by  national  exchanges.  Hence  we  see, 
that  national  exchanges  enter  into  the  constitution  of 
things  under  which  we  are  created,  as  much  as  individual 
exchanges. 

And  the  final  cause  of  this  constitution  is,  in  both 
(ases,  equally  evident. 

Individuals  are  made  thus  dependent  upon  each  other, 
ill  order  to  render  harmony,  peace,  and  mutual  assist 
ance,  their  interest  as  well  as  their  duty.  Where  men 
are  mutually  dependent  upon  each  other,  the  prosperity 
of  one,  is  the  prosperity  of  all  ;  and  the  adversity  of 
one,  is  the  adversity  of  all.  No  one  can  enjoy  many 
of  the  blessings  which  God  has  intended  for  him,  only 


160  NATIONAL     EXCHANGE. 

In  so  far  as  others  enjoy  them  also  ;  and  no  one  can  be 
deprived  of  them,  unless  others  are  deprived  of  them 
to  a  considerable  degree  also.  Thus,  we  see  that  the 
individual  progress  of  man,  is,  by  the  constitution  of 
things,  indissolubly  connected  with,  .f  not  absolutely  de- 
pendent on,  his  social  progress. 

And,  for  the  same  reason,  nations  are  dependent 
upon  each  other.  From  this  universal  dependence,  wo 
\earii  that  God  intends  nations,  as  well  as  individuals,  to 
live  in  peace,  and  to  conduct  themselves  towards  each 
other  upon  the  principles  of  benevolence.  Where  all 
are  mutually  dependent,  as  in  the  former  case,  no  one 
can  prosper  without  increasing  the  prosperity  of  all,  nor 
suffer  without  bringing  suffering  upon  all.  Hence,  it  is 
as  truly  our  interest  to  seek  the  happiness,  peace,  and 
prosperity  of  other  nations,  as  it  is  to  seek  the  happiness, 
peace,  and  prosperity  of  our  own  nation. 

9.  From  the  above  constitution  it  is  evident,  that  uni- 
versal exchange  is  as  necessary  to  the  welfare,  and  even 
to  the  existence  of  the  human  race,  as  universal  pro- 
duction. We  have  already  seen,  that  in  all  the  depart- 
ments of  human  industry,  a  great  saving,  both  of  time 
and  expense,  is  effected  by  division  of  labor.  This  is 
as  true  of  labor  in  exchange,  as  in  any  other  case. 
Since,  then,  exchanges  must  be  made,  it  will  be  better 
for  the  lo/io/c,  if  a  part  of  a  society  devote  themselves 
exclusively  to  the  business  of  making  them. 

Thus  ;  suppose  thai,  in  a  given  society,  the  labor  is 
divided,  so  that  each  individual  devotes  himself  to  the 
creation  of  a  given  product.  One  man  raises  wheat, 
another  rye,  another  wool  ;  one  labors  upon  iron,  anoth- 
er upon  wood,  another  upon  leather,  &c.  Now,  theso 
persons  can  procure  the  productions  of  each  other  only 
by  exchange.  But  if  every  one,  every  time  he  needs 
any  thing,  is  obliged  to  leave  his  labor  to  find  a  pur- . 
chaser  for  his  product,  he  will  lose  much  time  himself, 
and  will  consume  a  large  portion  of  the  time  of  all  his 
neighbors  It  would  frequently  take  as  much  time  to 
exchange  a  pair  of  shoes,  as  it  would  take  to  make 
them.      This  additional  time  must  enter  into  the,  price  of 


NATIONAL      EXCIIANUE.  161 

the  shoes  ;  and  lieiice,  these,  and  every  other  article  of 
consumption,  would  rise  in  price  accordingly. 

In  sucli  a  case  as  this,  it  would  clearly  be  a  great 
Denefit  lo  the  whole  society,  if  some  one  should  de- 
vote himself  exclusively  to  the  business  of  making  ex- 
changes. Every  producer  might  then  deposit  with  hini 
whatever  he  had  to  exchange,  instead  of  going  in  search 
of  a  purchaser.  When  this  was  done,  every  one,  by 
going  to  him,  might  ascertain  iuunediately,  what  was  to 
be  exchaneed,  throughout  the  whole  community,  and  at 
what  price  ;  and  also,  what  was  required  in  exchange. 
He  would  thus  be  able,  at  once,  to  procure,  by  his  own 
product,  whatever  was  procurable  for  it  ;  and  to  know 
what  he  must  produce,  in  order  that  he  may  procure 
what  he  may  need.  Thus,  the  labor  of  a  whole  day,  or 
of  several  days,  might  be  accomplished  in  a  few  min- 
utes, in  a  much  more  perfect  manner,  than  by  any  other 
method.  Hence,  as  all  the  time  unnecessarily  consucned 
in  the  other  method  would  be  saved,  much  more  time 
might  be  appropriated  to  production.  As,  in  a  given 
time,  and  with  given  labor,  there  would  be  greater  pro- 
duction, every  thing  would  be  cheaper,  that  is,  every 
one  would  be  richer  ;  and,  at  the  same  time,  a  reasona- 
ble profit  would  remain  for  him  who  devoted  his  time  to 
the  labor  of  exchange. 

Hence,  we  see  that  exchangers  are  as  necessary  to 
the  cheapness  of  production  as  producers  themselves. 
Hence,  we  also  see  how  absurd  is  the  outcry  sometimes 
raised  against  them,  because  it  is  said  they  produce  noth- 
ing. Did  not  a  large  class  of  the  community  devote 
themselves  to  this  employment,  it  is  impcjssible  to  con- 
ceive what  would  be  the  price  of  the  most  conmion  and 
necessary  utensil.  Were  the  farmer  obliged  to  carry 
his  wheat  or  his  cattle  to  Sheffield,  to  exchange  for  nee- 
dles for  his  wife,  or  for  a  sickle  for  himself,  who  could 
estimate  what  these  utensils  would  cost  ?  If  the  laborer 
were  obliged  to  go  to  Birmingham  for  a  spade,  which 
he  must  use  in  New  York,  what  would  be  the  price  of  a 
spade,  and  how  would  he  ever  be  able  to  gain  a  subsis 
tence .  The  laborer  may  sometimes  complain  that  the 
14* 


162  RETAIL     MERCHAjNTS. 

merchant  is  rich,  and  ti^at  he  is  poor  ;  thai  the  merchant 
stands  at  his  desk,  while  he  labors  in  the  sireei  ;  that 
the  merchant  rides  in  his  carriage,  while  he  travels  on 
foot.  But  it  may  be  to  him  some  consolation  to  remem- 
ber, that  were  not  the  merchant  rich,  the  laborer  would 
be  still  poorer,  for  every  article  would  be  dearer ;  and, 
besides,  there  would  be  no  one  to  pay  for  the  labor  with 
which  alone  he  is  able  to  purchase  it.  Were  not  the 
merchant  to  be  at  his  desk,  the  poor  man  would  have  no 
labor  to  do  in  the  street  ;  and  were  not  the  merchant 
able  to  ride  in  his  carriage,  the  laborer  would  be  obliged 
to  go  barefoot.  And  accordingly,  we  see  that  when- 
ever mercantile  business,  that  is,  the  business  of  ex- 
changes, is  the  most  successful,  then  are  the  means  of 
living  cheaper  in  proportion  ;  and  then  are  the  operative 
classes  richer  ;  and  the  avenues  to  riches  the  most  widely 
open  to  all. 

The  persons  who  conduct  the  exchanges  of  a  com- 
munity are  called  merchants.  They  are  of  two  classes, 
viz  :  Retail  JMerchants  and  Wholesale  Merchants. 

The  retail  merchant  carries  on  exchanges  between  the 
inhabitants  of  the  same  country.  He  pinchases  of  the  man- 
ufacturer or  the  importer,  in  quantities  too  laige  for  the 
means  of  the  individual  consumer,  and  sells  again  in  any 
quantities  that  the  consumer  may  desire.  This  produces 
a  great  saving  of  time,  and  of  course  of  expense,  to  the 
whole  community.  Were  the  manufacturer  obliged  to 
leave  his  labor,  to  sell  a  yard  of  calico,  the  price  of  cal- 
ico would  be  trebled.  Were  the  importer  obliged  to 
(>\)en  his  hogsheads,  to  sell  a  pound  of  sugar,  he  must 
charge  a  price  accordingly.  And,  besides,  as  each  im- 
porter and  manufacturer  is  supposed  to  confine  himself 
to  one  particular  product,  the  purchaser  would  be  oblig- 
ed, frequently,  to  go  great  distances,  and  tiansact  with  a 
great  number  of  persons,  business  which  he  niay  now 
be  able  to  accomplish  with  a  single  individual.  Every 
one  must  thus  perceive,  that  a  consumer  saves  much 
time  by  purchasing  his  sugar,  tea,  coffee,  pepper,  salt, 
&c.,  at  one  shoji,  instead  of  going  to  the  wholesale  im- 
porters of  these  articles  individually  ;  specially  if,  as  is 


WHOLKSALE    MF.RCIIANTS.  1<J5 

frsqiiently  the  case,  they  lived  some  hundreds  of  miles 
asunder.  It  is  much  more  economical  to  buy  needles, 
tape,  cotton,  calico,  and  silk,  at  one  shop,  than  to  go  to 
the  several  individuals,  in  dillerent  j)laces,  who  have  im- 
ported or  made  these  articles  in  large  quantities.  In 
consequence  of  this  advantage  to  the  community,  the 
retail  dealer  is  able  to  charge  a  profit  on  all  the  articles 
which  he  sells,  and,  at  the  same  time,  to  furnish  them  at 
a  much  lower  price  than  that  at  which  the  purchaser 
could  procure  them,  in  any  other  mariner.  The  pur- 
chaser not  only  procures  them  cheaper,  but  he  procures 
(hem  of  a  better  quality.  It  is  the  business  of  the  re- 
tail dealer  to  understand  the  quality  of  every  article  in 
which  he  traffics,  and  it  is  for  his  interest  to  purchase  it 
cheaply,  and  of  as  good  quality  as  it  can  be  purchased 
in  the  market  ;  since  it  is  on  the  go(^dness  and  cheapness 
of  his  articles,  that  his  custom  depenrls.  The  consumer 
is  thus  enabled  to  employ  for  his  benefit,  a  skill  vastly 
greater  than  his  own  ;  and  at  a  much  less  cost,  than  thai 
at  which  he  could  accomplish  the  business  himself. 
Hence  retail  dealers  are  as  necessary  to  the  prosperity 
of  a  country,  and  to  the  cheapness  of  productions,  as 
any  other  class  of  persons.  And  it  will  be  found  very 
universally,  that  it  is  much  more  economical  to  employ 
their  services,  than  for  a  man  to  undertake  to  do  theii 
business  for  himself. 

The  wholesale  merchant^  conducts  the  exchanges  be 
tween  the  individuals  of  dilFerent  nations.     He  exports, 
in   bulk,  the   commodities  of  his  own  country,  and  im- 
ports, in  return,    the  commodities  of  another  country. 
His  own  interest  induces   him  to  export  whatever  is  at 
the  lowest   price   in   his  own   country  ;  that  is.  of  what 
may  be  there  in  the  greatest  abundance;  and  bring  lack, 
in   return,  v^diatever  will  command  the  highest  price   at 
Iiome  ;  that,   is,   of   which   there   is   the    greatest   need 
And  his  own  interest  wnll,  of  course,  teach  him  to  pro 
cure  what  he  brings  home,  at  the  place  where  it  can  be 
had  at  the  cheapest  rate  ;  so  that  he  may  be  able  to  fur- 
nish it  at  the  hightest  profit  to  himself,  and  at  the  lowest 
price  to  others.      Hence   hi?   interest,  and   that  of  the 
community,  are  the  same.      It   is   for  the  interest  of  the 


164  WHOLESALE    MERCHANTS. 

community  that  those  commodities,  of  which  we  have  a 
superfluity,  siiould  be  exported  ;  and  the  fact  of  this  su- 
perfluity is  known  by  the  reduction  of  their  price,  in 
comparison  with  the  price  of  other  commodities  at  home, 
or  of  the  same  commodity  in  other  countries.  It  is  for 
the  interest  of  the  merchant  to  export  the  same  commo- 
dity, because  the  lower  the  price  at  which  he  purchases 
it  at  home,  on  the  better  terms  he  can  exciiange  it 
abroad.  It  is  for  the  interest  of  the  community,  that 
those  objects  of  desire  which  are  most  wanted  should  be 
brought  back  in  return  ;  and  the  rise  in  their  exchange- 
able value  is  the  proof  that  they  are  so  wanted.  It  is 
for  the  merchant's  inte  3st,  also,  to  bring  back  these 
very  commodities  ;  for,  from  these  alone,  can  he  expect 
gain,  and  that  gain  will  be  the  greater,  in  proportion  as 
he  procures  them  on  the  most  favorable  terms  ;  that  is,  as 
he  procures  them  where  they  are  the  cheapest  and  most 
abundant.  Hence,  his  gain  will  be  in  proportion  as  he 
can  transfer  the  productions  of  the  earth  from  those  regions 
where  they  are  least  wanted,  to  those  regions  where  they 
are  most  wanted.  And  this  is  precisely  what  the  interests 
of  society  require  should  be  done. 

To  the  merchant,  it  "is,  of  course,  a  matter  of  no  con- 
sequence, what  he  exports  and  what  he  imports.  Un- 
less a  commodity  were  more  wanted  at  home  than  tliat 
for  which  he  would  exchange  it,  he  could  have  no  mo- 
tive to  make  the  transfer.  And  that  it  is  so  wanted,  is 
evident  from  the  fact,  that  the  community  is  willing  to 
give  a  higher  price  for  it  than  for  that  which  is  exported. 
If  he  desired  it,  he  could  not  make  any  profit,  except 
by  consulting  the  wants  of  the  community  ;  and  tliat 
profit  will  be  the  greater,  in  proportion  as  he  is  able  to 
consult  tliose  wants  with  the  greatest  possible  nicety. 
His  gains  are  the  gains  of  the  community,  and  his  losses 
are  the  losses  of  the  community.  Hence,  there  is  no 
reason  why  he  should,  in  any  manner,  be  restricted  in 
the  nature  or  the  quantity  of  the  articles  which  he  exports 
or  imports.  The  constitution  of  things,  and  his  own 
self-interest,  provide  all  the  regulating  forces  which  the 
nature  of  the  case  requires. 


EXCHANGEABLK  VALUE  OF  PRODUCTS.     165 

SECTION  II. 

THE    GENERAL    DOCTRINES    OF    EXCHANGE. 

1.  Of  the  rale  of  Exchange,  or  the  exchangeabh 
value  of  Products. 

If  two  men  have  created  their  respective  productSj 
and  are  prepared  to  exchange  them,  it  is  manifest  that 
the}'  will  not  commonly  exchange  them,  quantity  for 
qiuuility  ;  because  a  given  amount  of  labor  will  procure 
a  much  larger  amount  of  some  products  ihan  of  others. 
The  same  laboi  which  will  procure  an  ounce  of  gold, 
will  procure  an  hundred  pounds  of  iron.  Hence,  the 
gold  miner  will  ofier  to  exchange  labor  for  labor  ;  that 
is,  an  ounce  of  gold  for  an  hundred  weight  of  iron. 
And,  if  the  miner  of  iron  will  not  exchange  on  these 
terms,  the  miner  of  gold  will  procure  his  iron  for  him- 
self. Since,  if  he  can  thus  procure  it  for  himself,  by  a 
less  amount  of  labor,  than  by  exchange,  he  will  do  so. 
Hence  it  is,  that  the  general  rate,  at  which  every  thing 
is  exchanged,  is  the  amount  of  labor  which  it  costs  to 
produce  it. 

But  we  have  previously  seen,  that  labor  appears  in 
two  forms,  that  of  annual  capital,  and  of  fixed  caj)ital. 
Both  of  these  enter  into  consideration,  when  we  speak 
of  labor  as  determining  the  exchangeable  value  of 
pioducts. 

For  instance  :  Suppose  I  purchase  wheat,  and  grind 
it  by  hand  ;  I  sell  it  again  at  an  additional  price,  pro- 
portioned to  the  labor  which  I  have  bestowed  upon  it. 
Suppose  I  thus  carii  money  enough  to  erect  a  wind- 
mill ;  I  shall  then  be  entitled  to  the  same  amount  of 
wages  per  day  for  my  labor,  and  also  to  an  additional 
sum  sufficient  to  pay  the  interest  of  what  was  expended 
in  my  wind-mill,  and  also  to  pay  for  its  wear  and  tear, 
in  performing  the  operation.  The  price  of  grinding 
was,  at  fii'st,  only  that  of  immediate  labor  ;  it  is  now  the 
price  of  immediate  labor,  together  with  the  interest  on 


166     EXCHANGEABLE  VALUE  OF  PRODUCTS. 

the  amount  of  the  pre-exerted  labor  It  is  however  to 
be  observed,  ihat  notwiihstanding  1  am  receiving  euiolu* 
ment  from  two  sources,  and  am  growirig  rich  faster  than 
before,  it  is  on  terms  vastly  more  favorable  to  the  com- 
munity, inasmuch  as  I  can,  for  the  same  remuneration, 
give  ten  times  as  much  in  return  us  I  could  before. 

The  case  is  the  same,  if  two  separate  individuals  are 
employed  in  the  operation,  the  one  owning  the  capita, 
or  stock,  and  the  other  performing  the  labor.  In  this 
case,  the  cost  consists  of  the  wages  of  labor,  and  of  the 
interest  on,  and  the  wear  and  tear  of,  the  capital.  Here, 
however,  as  before,  the  community  is  the  gainer  ;  be- 
cause, for  the  wages  of  labor  and  interest  on  capital,  it 
receives  a  much  larger  product  than  it  received  before, 
for  the  wages  of  labor  alone.  Thus,  if  a  machine  cost 
one  thousand  dollars,  and  there  were  paid  for  the  use  of 
it  one  hundred  dollars  a  year,  this,  added  to  the  wages 
of  labor,  at  a  dollar  a  day,  would  be  four  hundred  dol- 
lars, allowing  three  hundred  working  days  a  year.  This 
would  be  but  one  hundred  dollars  more  than  would  be 
paid  for  the  labor  of  the  man  alone.  But  a  man,  with 
such  an  instrument,  would,  probably,  in  a  year,  accom- 
plish ten  times  as  much  work  as  he  could  accomplish 
without  it.  All  the  gain  of  the  change  is,  therefore,  for 
the  benefit  of  the  public.  We  see,  therefore,  that  labor 
and  the  interest  of  capital,  must,  necessarily  and  justly, 
enter  into  the  price  of  every  product  which  is  offered 
in  exchange.  The  producer  can  never,  for  a  long  pe- 
riod, charge  more  than  a  fair  remuneration  for  his  labor 
and  capital  ;  because,  then,  it  would  be  cheaper  for  the 
other  party  to  produce  it  for  himself.  He  cannot,  for  a 
long  period^  charge  less  ;  because,  in  this  case,  he  will 
be  ruined,  anil  must  leave  the  employment  ;  and  thus  the 
number  of  producers  will  be  diminished,  and  the  value 
of  the  product  will  rise  to  the  average  rate  of  profit. 

Ne\  ertheless,  for  short  periods,  the  exchangeable 
value  of  any  product  may  be  raised  above  the  reason- 
al)le  rate  of  profit.  If  the  demand  exceed  the  sui)ply, 
there  will  be  a  competition  among  the  buyers  ;  tiie  more 
wealthy  will  overbid   the  less  wealihy,  and  the  price  will 


EXCHANGEABLE  VALUE  OF  PRODUCTS.     167 

rise,  'i'his  rise  of  price  will  induce  others  to  devote 
themselves  to  supplying  tiie  demand,  and  thus  the  price 
will  fall.  If  the  sui)[)ly  be  greater  than  the  denjand, 
there  will  arise  a  competition  among  the  sellers,  and  the 
price  will  fall,  and  will  remain  depressed,  until  either 
the  demand  increase,  or  else  until  so  many  leave  th<^ 
employment,  as  shall  reduce  the  supply  to  the  average 
demand. 

It  is  evident  that  it  makes  no  difference  as  to  t\ie 
result,  whether  the  ratio  between  suj)ply  and  demand  be 
disturbed  by  a  change  in  supply  or  in  demand.  If  the 
demand  continue  the  same,  a  diminished  supply  pro- 
duces the  same  effect  as  would  be  produced  by  an  in- 
creased demand,  while  the  supply  remained  the  same. 
And,  on  the  other  hand,  demand  being  the  same,  ar. 
increased  supply  jiroduces  the  same  result  as  when,  sup- 
ply being  the  same,  the  demand  is  increased  ;  that  is,  in 
the  one  case,  the  exchangeable  value  of  the  product  will 
rise  ;  in  the  other  case,  it  will  fall. 

It  deserves,  however,  to  be  remarked,  that  this  effect, 
produced  by  the  disttn-bance  of  the  ratio  between  supply 
and  demand,  will  be  greater  or  less,  according  to  sev- 
eral circumstances.      These  are  : 

1.  The  durability  of  the  commodity.  If  it  be  one 
which,  unless  it  be  consumed  immediately,  will  become 
worthless,  the  fall  of  price,  from  increased  supply,  is 
great.  Such  is  the  case  with  oranges,  lemons,  figs, 
fresh  fish,  &c.  If,  on  the  contrary,  it  be  a  commodity 
which  will  endure  for  years,  without  loss  of  intrinsic 
value,  the  effect  will  be  less.  Thus,  an  increased  sup- 
ply of  iron,  produces  in  the  market  a  comparat  vely 
small  variation  in  the  price. 

2.  Variation  of  price,  from  this  cause,  depends,  also, 
upon  the  ease  or  difficulty  with  which  the  supply  may 
be  increased.  Thus,  manufactured  articles  can  gener- 
ally be  produced  in  a  short  time,  and,  if  necessary,  in  a 
niurh  more  than  usual  quantity.  Agricultural  products, 
on  the  f'ontrary,  require  a  year,  in  order  to  be  brought 
to  perfection.  Hence,  if  a  crop  fail  this  year,  we  know 
that   there  must  be  a  diminished   supply   in   the   whole 


168  EXCHANGEABLE    VALUE    OF    PRODUCTS. 

country,  for  the  remainder  of  the  year  ;  and  hence,  ah 
there  must  be  a  scarcity,  every  one  is  prepared  to  give 
as  much  as  he  is  able.  But,  if  cotton  cloih  be  high, 
unless  the  rise  of  price  be  owing  to  a  diminished  pro- 
duction of  the  material,  this  high  price  will  cause  more 
cloth  to  be  made,  and  hence,  before  long,  the  price  will 
fall.  We  therefore  puichase  only  as  much  as  we  abso- 
lutely need,  and  wait  for  the  favorable  change. 

3,  It  will  be  affected  by  the  nature  of  the  demand 
for  the  article.  If  it  be  an  article  of  universal  neces- 
sity, it  will  lise  more  rapidly  by  scarcity,  and  sink  less 
rapidly  by  increased  supply  ;  while,  if  it  be  an  article  of 
mere  luxury,  it  will  rise  less  rapidly  by  scarcity,  and 
smk  more  rapidly  by  increased  supply.  When  every 
one  must  have  a  commodity,  the  demand  is  constant, 
and  every  one  is  alarmed  at  the  prospect  of  suffering  ; 
hence,  he  purchases  it  at  any  price.  And,  on  the  other 
hand,  if  the  supply  be  abundant,  the  holder  knows  that 
the  ordinary  consumption  will  soon  reduce  the  quantity 
in  market,  and  rather  than  sell  at  a  reduced  profit,  he 
will  wait  for  the  change  of  price.  On  the  contrary,  if 
an  article  of  luxury  be  scarce,  men  begin  to  abandon  it, 
and  thus  the  demand  is  quickly  reduced.  If  it  be  abun- 
dant, the  number  of  purchasers  does  not  increase  with 
the  su])[)ly,  because  men  have  not  yet  learned  to  use  it  ; 
hence,  its  fall  in  price  is  rapid,  being  not  sustained  by  a 
correspondent  increase  of  demand. 

These,  I  think,  are  the  princijial  circumstances  which 
enter  into  the  exchangeable  value  of  products.  They  are 
variously  combined  and  modified,  so  that  they  may  some- 
times counteract,  and  sometimes  exaggerate  each  other. 
But,  I  think,  that,  by  applying  them  to  the  actual  occur- 
rences of  life,  we  may  geneially  be  able  to  explain  the 
fluctuations  of  price,  which  are  daily  taking  place  in  the 
market 

II.  WJien  an  article  of  produce  is  offered  for  ex- 
change, the  producer  has  conferred  vpon  it  his  last 
value,  and  it  is  now  ready  for  the  consumer. 

By  the  consumer,  here,  I  do  not  mean  him  only  who 
gratifies  his   desire  by   the   ultimate   destruction   of  the 


RAl'lDlTVf     OF    EXCHANGES.  IC9 

prcdiict,  bul  also  hiin  who  receives  it  for  the  purpose  of 
giving'  to  it  some  other  modification.  The  exchangei 
confers  upon  it  no  new  value.  It  is  the  same  v\lieu  it 
passes  out  of  his  hands  to  the  consumer,  as  when  it 
came  into  his  hands  from  the  producer  :  that  is,  in  gen- 
eral, exchange  confers  no  value  at  all  upon  products  ; 
since  they  receive  no  modification  by  passing  from  the 
hands  of  one  person  to  those  of  another. 

1.  Hence,  it  will  be  seen,  that  the  more  rapidly  ex- 
changes are  ntade,  the  better.  The  more  rapidly  diey 
are  made,  the  less  is  the  loss  of  interest,  and  the  snmller 
the  advance  which  the  exchanger  must  charge  for  his 
labor.  If  a  merchant  purchase  to-day  a  thousand  dol- 
lars' worth  of  iron,  which  he  sells  to-morrow,  he  charges 
us  for  his  labor  and  skill,  and  adds  only  the  interest  for 
one  day  upon  his  capital.  If  he  must  keep  the  iron  a 
whole  year  before  he  sell  it,  he  must  charge  the  interpst 
of  a  whole  year,  or  else  he  will  be  the  loser  by  iiis 
operation. 

Nor  is  this  all.  If  he  sell  his  iron  to-morrow,  he 
may  invest  the  same  sum  in  iron,  and  sell  it  again  fifty 
times  in  the  course  of  the  year  ;  and  thus  receive  a 
profit  fifty  times  a  year,  upon  the  use  of  his  skill  and 
labor,  while,  in  the  other  case,  he  receives  this  profit 
but  once.  Hence,  when  exchanges  are  rapid,  he  can 
afford  to  exchange  at  a  less  rate  for  his  labor  and  skill, 
than  when  they  are  slow.  And  hence,  brisk  exchanges 
are  for  the  benefit  of  both  buyer  and  seller  ;  and  a  ben- 
efit to  one,  is  a  benefit  to  all.  It  is  for  this  reason, 
among  others,  that  we  can  frequently  purchase  at  a 
cheaper  rate  in  a  large  city,  than  in  a  country  town. 

2.  And  hence  we  see  a  reason,  why  the  profit  upon 
one  operation  in  some  kinds  of  exchange,  is  greater  than 
that  in  others.  The  profits  of  the  wholesale  mercliani 
on  a  pound  of  tea,  are,  for  instance,  greater  than  those 
of  the  retail  merchant.  He  who  sends  his  capital  to  the 
East  Indies,  and  receives  in  return  a  cargo  of  teas, 
must  charge  interest  and  risk,  for  the  whole  time  con- 
sumed, from  the  day  that  he  parts  with  his  property, 
until  the  day  that  he  receives  it  again.     This  may  be 

15 


J70  DIFFERErv'CES    OF    PROFrX. 

nearly  two  years.  The  retail  merchant  \vho  purchases 
one  of  those  chests  of  tea,  may  sell  it  all  in  a  week,  and 
thus  invest  it  fifty  times  in  the  course  of  a  year. 
Now,  if  the  profit  on  an  exchange  were  as  great  in  the 
one  case  as  in  the  other,  the  annual  gains  of  the  I'etail 
merchant  would  be  exorbitant.  These  are  reduced,  by 
competition,  to  the  average  level  ;  and  hence,  his  gains 
on  any  single  operation  are  much  less  than  those  of  the 
wholesale  merchant.  The  same  principle  applies  to 
production.  The  greater  the  time  consumed  in  an  op- 
eration, the  larger  is  the  profit  on  each  article  which 
justly  belongs  to  the  producer. 

3.  But,  though  the  act  of  exchange  add  nothing  to 
the  absolute  value  of  the  commodity,  it  adds  greatly  to 
Its  relative  value,  that  is,  to  the  convenience  both  of 
the  buyer  and  the  seller  ;  inasmuch  as  it  enables  both  to 
gratify  a  desire,  which,  otherwise,  would  have  been  un- 
satisfied. If  I  want  a  pen-knife  more  than  I  want  a 
dollar,  and  a  hardware  merchant  wants  a  dollar  more 
than  he  wants  a  pen-knife,  we  make  the  exchange  with 
each  other.  The  dollar  is  the  same  as  before  ;  it  will 
buy  no  more  in  his  hands  than  it  will  in  mine.  The 
pen-knife  is  the  same  as  before  ;  it  has  neither  gained 
nor  lost  ;  and  I  might,  if  I  chose,  exchange  it  with  the 
next  man  I  met,  for  a  dollar.  But,  both  the  merchant 
and  myself  are  benefited  by  the  exchange.  I  can  use 
the  knife  for  purposes  for  which  I  could  not  use  the 
dollar  ;  and  thus  render  my  labor  per  day  much  more 
valuable.  The  merchant  has  received  a  full  remunera- 
tion for  his  labor,  capital,  and  skill,  and  is,  by  so  much, 
richer  than  he  was  before.  That  both  of  us  have  been 
benefited  by  the  exchange,  is  evident  from  the  fact,  that 
neither  of  us  would  make  the  exchange  ba(;k  again. 
If  a  hungry  man  have  a  piece  of  silver,  and  a  bakei 
have  a  loaf  of  bread,  they  will  readily  exchange  with 
each  other.  The  silver  is  the  same,  and  the  loaf  is  the 
same,  as  before  ;  but  still,  both  parties  are  richer  and 
happier  ;  and  neither  would  the  hungry  man  take  back 
the  same  piece  of  silver  for  his  loaf;  nor  the  baker  take 
back  the  loaf  for  the  silver. 


DIFFERENCES    OF    PROFIT  171 

Tlie  case  is  the  same  witli  nations.  If  a  nation  ex- 
change iron,  of  which  it  has  more  than  it  can  consnme, 
for  wheat,  which  it  cannot  pro(hicc,  vvitli  a  nation  which 
has  more  wlicat  than  it  can  consume,  but  produces  no 
iron,  the  wheat  and  the  iron  are  the  same  as  before  ; 
but  each  nation  is  richer  and  happier  :  each  has  one 
more  desire  gratified  than  before,  and  is  able  the  next 
jMjar  to  increase,  more  largely,  its  stock  of  production. 
That  both  are  happier  than  before,  is  evident  ;  becaus  e 
neither  would  reverse  the  exchange,  if  it  were  in  its 
power.  And  thus,  in  general,  whenever  two  nations 
mutually  wish  to  exchange  their  productions  with  each 
other,  and  are  mutually  gratified  when  the  exchange  is 
made,  it  is  evident  that  both  are  made  happier,  and  that 
the  exchange  has  been  advantageous  to  both  parties. 

Hence  we  see,  how  fallacious  is  the  notion  formerly 
entertained,  that,  by  exchange,  only  one  party  is  bene- 
fited ;  and  consequently,  that  what  one  party  gains,  the 
other  party  loses.  Were  this  the  case,  no  country  could 
grow  rich  by  exchange,  unless  by  impoverishing  every 
other  country  ;  and  the  gain  of  one  nation,  would  be 
nothing  else  than  a  transfer  of  the  wealth  of  other  coun- 
tries to  itself.  On  the  contrary,  precisely  the  reverse  is 
the  case.  The  most  favorable  commerce  to  any  one 
country,  is,  that  by  which  the  riches  of  both  countries 
are  the  most  rapidly  increased.  A  merchant,  whose 
gains  were  all  derived  from  the  impoverishment  of  his 
customers,  would  very  soon  have  none  but  paupers  for 
neighbors.  A  nation,  whose  traffic  caused  the  inipov 
erishment  of  another  nation,  would  very  soon  be  ob'iged 
to  discontinue  conmierce  The  only  traffic  of  this  sort, 
is  the  African  slave-trade,  and  the  result  has  been  the 
almost  entire  depopulation  of  the  slave  coast.  And  thus, 
we  see,  in  political  economy,  as  in  morals,  every  benefit 
is  mutual  ;  and  we  cannot,  in  the  one  case,  any  more 
than  in  the  other,  really  do  good  to  ourselves,  witiioul 
doing  good  to  others  ;  nor  do  good  to  others,  witliout 
also  doing  good  to  ourselves. 

In  what  I  have  said  of  exchange,  it  is  to  be  observe<l 
that  I  have  spoken  of  exchange  simply,  and  not  as  com- 


173  CONDITIONS    OF    EXCHANGE. 

bined  with  the  labor  of  transportatior.  The  labor  of 
transportatiDn  gives  an  additional  value  to  an  article  j 
that  is,  it  confers  upon  it  change  of  place.  This  has 
been  already  spoken  of.  It  is  true,  a  merchant  frequent- 
ly pel  forms  this  labor,  or  causes  it  to  be  performed.  In 
this  case,  he  is  entitled  to  a  double  profit ;  first,  for  the 
labor  of  transportation,  and  secondly,  for  the  labor  and 
skill  of  exchange.  He  who  labors  in  either  of  these 
employments,  is  entitled  to  the  profit  derived  from  that 
in  whifh  he  labors  ;  and,  he  who  labors  in  both,  is  enti- 
tled to  the  profit  of  both.  In  speaking  of  the  profit  of 
exchange^  it  is  always  to  be  observed,  that  the  profit  of 
the  merchant  is  derived,  partly^  from  his  labor  and  skill, 
and  partly  from  his  capital.  He  who  exports  to  France 
one  hundred  thousand  dollars'  worth  of  cotton,  must  first 
buy  the  cotton  ;  that  is,  he  must  have  one  hundred  thou- 
sand dollars  to  invest  in  this  exchange.  He  exchanges 
the  cotton  for  silks  or  for  calicos,  and  re])laces  his  first 
investment.  He  is  entitled  to  interest  and  risk  on  that 
capital,  for  all  the  time  that  it  is  out  of  his  hands,  besides 
the  remuneration  for  his  labor  and  skill. 

III.  Of  the  conditions  on  which  the  frequency  or  in- 
frequency  of  exchanges  depends. 

It  is  manifest  that  the  more  numerous  are  the  ex- 
changes, the  better  must  it  be  for  a  community.  As  no 
one  exchanges,  except  to  gratify  his  desires,  and  to  im- 
prove his  condition,  the  more  numerous  the  exchanges, 
the  greater  the  number  of  desires  which  will  be  gratified, 
and  the  more  universally  will  the  condition  of  a  people 
be  improved.  It  is  also  evident,  that  facility  of  ex- 
change is  one  of  the  greatest  stimulants  to  production. 
If  a  ntan  cannot  transform  his  proilucts  into  what  he  de- 
sires, he  will  labor  for  nothing  but  the  mere  necessaries 
of  life.  But  in  just  so  far  as  he  is  able,  by  exchanging 
the  products  of  his  labor,  to  procure  objects  of  desire, 
his  motives  to  industry  will  be  quickened.  .And  the 
same  is  true  of  nations.  Iwery  one,  whether  |)oet,  or 
philosopher,  or  traveller,  in  setting  forth  the  prosperity 
of  a  country,  has  described  its  harbors  thronged  with 
ships,  its  roads  covered  with  merchandise,  and  its  sails 


CONDITIONS     OF     RXCHANGE.  173 

whitening  every  ocean.  But  all  these  are  only  so  many 
forms  of  exj)ressing  the  general  fact,  that  a  nation's  ex- 
changes, both  internal  and  external,  are  abundant  and 
prosperous  ;  that  is,  that  its  producers  are  able,  by  their 
own  labor,  easily  to  avail  themselves  of  every  other  pro- 
duction which  they  may  desire. 

We  have  said  that  exchange  is  a  voluntary  and  mutual 
tiansfer  of  the  right  of  property. 

If  this  be  the  case,  there  must  exist,  in  3ach  paily, 

1.  A  mutual  desire  for  the  property  of  the  other, 
greater  than  the  desire  for  his  own. 

2.  Mutual  ability;  that  is,  each  party  must  be  alle  to 
ofler  to  the  other,  such  a  consideration  as  will  induce 
him  to  make  the  exchange. 

Where  both  of  these  exist,  exchanges  will,  of  course, 
take  place.  If  A  have  a  dollar  which  he  wishes  to  part 
with  for  B's  knife,  and  B  has  a  knife  which  he  wishes  to 
part  with  for  A's  dollar  ;  as  soon  as  each  knows  the  wish 
of  the  other,  they  will  mutually  gratify  each  other,  and 
the  exchange  will  take  place. 

3.  As,  however,  the  right  of  property  alone  is  fre- 
quently transferred,  while  the  proj)erty  itself  is  not  de- 
hvered  at  the  time  of  the  exchange,  there  is  always,  in 
such  an  act  of  exchange,  a  liability  to  fraud.  Besides,. 
a  commodity  may  not  prove  to  be  as  good  as  it  was  rep- 
resented, or  the  owner's  title  may  not  be  satisfactory. 
In  all  such  cases,  there  is  an  opportunity  for  the  practice 
of  dishonesty  ;  and  the  risk  of  sufFering  from  such  dis- 
honesty, would,  of  course,  diminisli  the  frequency  of 
exchanges.  Hence,  frequency  of  exchanges  will  also 
depend  upon  security  of  the  right  of  property,  and  the 
existence  of  the  means  for  enforcing  that  right. 

If  we  now  reflect  upon  these  facts,  I  think  we  must 
perceive,  that  the  desires  of  a  people  for  exchange,  will 
dej)end,  principally,  upon  ihe'iv  intelligence.  Their  abil- 
ity will  depend  upon  the  productiveness  of  their  labor  and 
capila.  and  the  seciiritij  of  property  will  depend  upon 
their  ind\i.idual  and  social  morality.  That  is,  exchanges 
will  be  frequent  in  proportion  to  the  intelligence^  wealth, 
and  moral  character  of  a  people. 
15* 


174  CONDITIONS     OF    EXCHANGE. 

1.  Exchanges  will  be  frequent  or  unfrequent,  in  pro- 
portion to  the  intelligence  or  ignorance  of  a  people.  It 
is  only  by  the  diirusion  of  knowledge  that  men  ascertain 
how  their  desires  may  be  gratified.  It  is  by  knowledge 
that  the  desires  of  man  are  brought  into  relation  with  the 
objects  intended  by  his  Creator  for  their  gratification. 
Every  one  knows  how  the  dormant  desire  for  exchange 
is  awakened  in  the  bosom  of  a  child,  the  moment  he 
enters  a  toy  shop.  I  suppose  that  strangers  rarely  pass 
through  the  streets  of  a  large  city,  without  being  strong- 
ly, if  not  successfully  tempted  to  lighten  their  pockets, 
before  the  termination  of  their  journey.  Every  reader 
knows,  how  quickly  his  desire  for  books  is  enkindled, 
by  passing  a  few  minutes  in  a  book  store.  And  thus  we 
see,  how  instantaneously  a  desire  for  exchange  arises  in 
the  breasts  of  savages,  as  soon  as  they  are  brought  into 
contact  with  civilized  man.  A  multitude  of  objects  for 
the  gratification  of  desire,  of  which  they  were  previously 
ignorant,  is  set  before  them ;  and  they  are  frequently 
stimulated  to  exchange,  to  their  own  disadvantage.  The 
early  voyagers  give  us  striking  illustrations  of  this  fact. 
They  represent  themselves  as  overwhelmed  with  these 
rude  people,  who  were  incessantly  offering  every  thing 
which  they  supposed  their  visitors  would  desire,  for  nails, 
beads,  pieces  of  looking-glass,  iron  hoops,  and  almost 
every  thing  on  which  they  could  lay  their  hands. 

Wlien,  bovvever,  I  sj)eak  of  intellectual  cultivation 
in  this  connexion,  it  is  to  be  understood  tliat  I  by  no 
means  refer  exclusively  to  llie  knowledge  and  mental 
discipline  wliich  is  acquired  by  the  reading  of  books. 
Books,  though  important  to  the  intellectual  progress  of 
a  country,  are  only  one  means  of  introducing  and  circu- 
latin;^  knowledge.  Knowledge  is  gained  by  observation, 
and  by  conversation  ;  and  it  is,  if  I  may  say  so.  absorb' 
ed  from  the  intellectual  atmosphere  wliich  we  breathe  ; 
it  is  derived  from  the  general  spirit  of  the  community  in 
which  we  live.  Thus,  a  man  rarely  goes  from  home  in- 
to another  country,  or  into  another  section  of  the  same 
country,  without  obtaining  a  knowledge  of  various  con- 
veniences of  which  he  was  before  ignorant.     Familiar 


CONIJinONS     OF     EX(,IIAi\GE.  175 

intercourse  between  men  of  diflereut  pursuits,  conduces 
to  the  same  result.  Newspapers,  filled  with  adveriise- 
ments,  ciicuhited  over  every  district  of  a  cy^unlry,  have, 
in  this  respect,  a  powerl'id  ellect.  All  these  causes 
combine  to  show  every  individual  what  he  can  produce 
which  other  men  want,  and  how  he  may,  by  exchange, 
procure  from  them  what  he  wants  himself. 

We  see  all  this  illustrated,  in  every  district  separated 
Dy  nature  from  the  surrounding  country,  as  a  valley  in- 
closed by  mountains  dinicull  of  access,  or  an*  island 
which  has  but  rare  communication  with  the  main  land. 
The  progress  of  such  a  population  in  the  arts,  and  in 
jtossessing  themselves  of  the  conveniences  of  life,  is  al- 
ways much  less  rapid  than  that  of  their  more  highly- 
favored  neighbors.  They  know  but  little  of  what  is  go- 
ing on  around  them,  and  their  desires  are  but  feebly 
slimidated  to  im]>rove  their  condition.  The  state  of 
such  a  population  is  always  suddenly  and  rapidly  improv- 
ed, by  any  means  of  easy  communication  with,  (heir 
neighbors.  They  are  stimulated  at  once  to  develope 
their  own  resources,  and  thus  to  share  in  the  benefits 
enjoyed  by  those  around  them.  Thus,  the  Pastor 
Oberlin,  a  truly  great  and  good  man,  when  he  wished  to 
improve  the  condition  of  the  Ban  de  la  Roche,  com- 
menced by  inducing  his  people  to  repair  their  roads. 
Hence  we  see,  how  important,  in  this  respect,  to  a 
nation,  are  all  means  of  internal  comniunication,  and  the 
facilities  for  the  universal  circulation  of  the  commonest 
forms  of  know'ledge. 

2.  Exchanges  will  be  numerous,  in  proportion  to  the 
producticeness  of  a  country. 

We  have  already  seen,  that  simple  desire,  in  both 
parties,  is  not  sufficient  to  effect  exchanges.  Kach  party 
must  both  possess,  and  be  willing  to  part  with,  so  large 
a  |)ortion  of  the  product  desired  by  the  other  party,  that 
the  other  is  willing  to  make  the  desired  exchange. 
E\ery  man  desires  a  horse  and  carriage,  and  every  man 
who  either  raises  horses  or  manufatauies  carriages,  is 
willing  to  part  with  them  for  an  equivalent.  But  until 
every  man   have  something  to  offer  for  a  horse  and  car- 


176  CONDITIONS    OF    EXCIIAN'JE. 

riage,  which  will  induce  the  other  parties  to  make  the 
exchange,  eveiy  one  cannot  he  so  accommodated.  If 
A  have  wlieat  which  lie  is  willing  to  exchange  for 
rye,  but  if  B  either  have  no  rye  which  he  is  able  to  of- 
fer in  exchange,  or  have  it  not  in  sufficient  quantity  to 
remuneiate  the  labor  of  A,  no  exchange  can  take  place. 
But  if  both  have  been  successful,  and  each  have  enough 
of  his  own  product  for  his  own  use,  and  is  also  able  tc 
offer,  on  fair  terms,  a  portion  in  exchange,  they  may 
then  exchange  with  advantage,  and,  of  course,  they  will 
do  so. 

Or,  again  :  If  A  and  B  have  only  so  much  surplus 
product  as  will  enable  them  to  make  this  one  exchange 
with  each  other,  much  as  they  may  desire  the  product  of 
C  and  D,  these  last  desires  must  be  ungratified  ;  since 
no  further  exchange  can  take  place.  Or,  on  the  contra- 
ry, if  A  and  B  have  abundance,  but  C  and  D  have 
been  unfortunate,  and  have  nothing  which  they  can  part 
with,  the  same  result  will  take  place.  But  let  A,  B,  C  and 
D  be  all  blessed  with  abundance,  and  all  have  surplus  prod- 
ucts which  they  are  willing  to  exchange  with  each  other, 
and  in  such  proportions  as  will  reward  each  other's  indus- 
try, and  they  will  all  exchange  accordingly.  Thus,  ex- 
changes must  always  be  most  numerous,  in  the  most  pros- 
perous condition  of  a  country  ;  or,  as  every  one  knows, 
mercantile  business  is  most  prosperous,  that  is,  exchanges 
are  most  abundant,  when  manufacturing,  agricultural,  and 
all  other  kinds  of  industry  are  most  productive. 

And  we  see,  moreover,  that  this  princi[)le  is  of  uni- 
versal application.  A  good  harvest  in  one  country,  is  a 
benefit  to  every  other  country  ;  because  the  favored 
country  desires  a  larger  amount  of  the  productions,  of 
her  neighbors,  and  has  a  larger  fund  wherewith  to  pay 
for  them.  Hence,  the  exchanges  between  such  a  coun 
try  and  every  other  country,  are  increased.  On  the 
contrary,  a  famine,  or  a  war,  or  any  other  calamity  in 
one  country,  is  a  calamity  to  every  other  country,  be- 
(;ause  the  unfortunate  country  wants  fewer  of  the  pro- 
ductions of  its  neighbors  ;  since  it  has  less  wherewith  to 
pay  for  them.     Its  exchanges,  therefore,  are  of  necer,si- 


CONDITIOJSS    OF     EXCHANGE.  177 

ty  diminished.  Hence,  that  mercliant  is  short  sighted, 
as  well  as  morally  thoughtless,  wiio  expects  to  grow 
rich  by  short  crops,  civil  dissensions,  calamity,  or  war, 
in  the  country  with  which  he  iraflics.  A  wiser  and  fur- 
ther-sighted redeclion,  would  teach  him  that  it  is  very 
difficult  to  grow  ricli  by  trading  with  beggars,  and  that  the 
benefit  of  one  is  always  the  benefit  of  all.  'J'o  illustrate 
all  this  by  a  single  case,  let  us  ask  what  would  be  the 
amoimt  of  exchange  efl'ected  by  the  inhabitants  of  (J i  eat 
Britain,  France,  and  the  United  States,  either  among 
themselves  or  with  each  other,  if  the  productiveness  of 
these  several  countries  were  no  greater  than  it  was  in 
the  time  of  Julius  Ca;sar  ? 

3.  Exchanges  will  be  numerous  in  proportion  to  the 
moral  character  of  a  people. 

1.  Individual  morality  is  highly  favorable  to  exchange, 
inasmuch  as  it  lessens  the  liability  to  fraud,  and,  of 
course,  the  risk  to  which  exchanges  are  exposed.  iVo 
one  will,  if  he  can  avoid  it,  trade  with  a  knave.  In 
proportion  to  the  prevalence  of  knavery,  will  be  the  dis- 
inclination to  exchange. 

2.  On  the  general  moral  character  of  a  people  depend 
the  equity  of  their  laws,  and,  of  coiu'se,  the  full  enjoy- 
ment of  the  right  of  projierty.  As  has  before  been  re- 
marked, exchanges  are  not  always  completed  at  the  in- 
stant. One  party  frequently  parts  with  his  property  to- 
day, on  condition  of  receiving  the  property  of  his  neigh- 
bor a  month  hence.  Here  is  a  liability  to  fraud.  Un- 
less the  one  party  have,  by  means  of  just  and  equitable 
law,  the  power  of  enforcing  contracts,  exchanges  will  be 
gieaily  restricted. 

3.  On  the  morality  and  intelligence  of  a  people,  will 
greatly  depend  the  freedom  of  its  civil  constitution  ; 
that  is,  the  accuracy  with  which  it  limits  the  power  of 
society,  over  the  person  and  property  of  the  individual 
When  these  are  improperly  understood,  or  insufficiently 
guarded,  the  property  of  the  citizen  is  liable  to  suflei 
from  the  avarice  or  the  oppression  of  rulers.  To  this 
evil,  property,  undergoing  exchange,  is  specially  liable. 
Exchange  exposes  to  the  view  of  the  public,  the  posses- 


178  STAGNATION    OF    BUSINESS. 

sion  of  the  parties,  and,  of  course,  enables  a  tyrant  to 
seize  upon  them  with  greater  certainty.  For  this  reason, 
exchanges  are  frequently,  under  bad  governments,  made 
in  secret  ;  and,  for  this  reason,  under  such  a  govern- 
ment, the)  are  always  as  few  as  possible,  and  at  great 
expense  to  the  consumer. 

Thus,  in  general,  the  frequency  of  exchanges  will  be 
in  proportion  to  the  wealth,  and  to  the  intellectual  and 
moral  character,  of  a  people.  And  since,  as  the  pro- 
gress of  a  nation,  in  these  respects,  will  promote  her 
mercantile  prosperity,  we  may  easily  see  what  will  de- 
press it.^  The  frequency  of  exchanges  will  diminish,  as 
a  nation  decreases  in  intelligence  and  virtue.  Of  the 
truth  .of  this  remark,  all  history  is  filled  with  illustra- 
tions. After  what  has  already  been  said,  it  will  not  be 
necessary  to  enlarge  upon  this  topic.  These  effects, 
moreover,  are  principally  to  be  observed,  by  comparing 
the  condition  of  a  country  at  long  periods  ;  and  tracing 
the  effects  of  measures  and  events  in  those  directions 
which  are  not  always  obvious   to  every  observer. 

While,  however,  the  government  and  laws  of  a  coun- 
try remain  the  same,  there  frequently  occurs  a  tempo- 
rary diminution  of  exchanges,  which  is  denominated  a 
stagnation  of  business.  This  deserves  to  be  noticed. 
As  the  business  of  a  merchant  is  to  execute  exchanges  ; 
that  is,  to  perform  the  labor  of  exchanging,  for  those 
who  wish  to  exchange  their  products,  a  stagnation  of 
mercantile  business  must  occur,  when  there  is  less  of 
this  operation  to  be  performed  ;  that  is,  the  merchant  is 
teady  to  perform  the  exchange,  but  a  less  number  of 
persons  desire  it  to  be  performed. 

The  reason  why  the  merchant  feels  this  more  serious- 
ly tlian  any  other  man,  is  obvious.  All  his  cai)iial  is 
invested  in  this  kind  of  operation.  He  buys  of  one 
party,  that  is,  invests  bis  capital  in  one  kind  of  product, 
and  sells  to  another,  that  is,  receives  his  product  in  ex- 
change, and  he  supports  himself  by  the  profit  of  these 
two  operations.  Tlie  moment  exchanges  cease,  his 
means  of  snjiport  are  dried  up  ;  for  he  is  supported  only 
by    making    them.      He  can    buy,  but    he    cannot    sell 


STAGxNATIOlS      OF     BUSir«!ESS.  170 

Hence  there  arises,  as  it  is  called,  a  stagnation  of  busi- 
ness ;  that  is,  a  cessation  or  dinjinution  of  exchanges. 
The  principal  causes  of  this,  are  the  following  ; 

1.  It  may  arise  from  a  diminislted  desire  for  a  partic- 
ular product.  Thus  the  decrease  of  the  Catliolic  reli- 
gion, during  the  wars  of  the  French  revolution,  dimin- 
ished the  desire  for  fish,  which  the  Catholics  eat  iu 
Lent,  and  on  fast  days.  This  produced  a  stagnation  of 
business  in  the  fish  trade. 

It  may  anse  from  change  of  fashion.  Thus,  when 
shoe-strings  were  substituted  for  shoe-buckles,  the  de- 
mand for  shoe-buckles  ceased  ;  the  manufacturers  of 
shoe-buckles  were  thrown  out  of  employment  ;  and 
there  was  a  stagnation  of  business  in  this    kind  of  trade. 

It  may  arise  from  the  fact,  that  one  particular  product 
has  been  supplanted  by  another.  Thus  the  increasing 
cheapness  of  cotton  cloth,  has  materially  diminished  the 
demand  for  linen. 

Wlienever,  from  any  cause,  the  desires  of  men  change, 
then  the  traffic  in  the  article  neglected,  must  be  dimin- 
ished ;  since  it  is  very  difficult  to  sell  to  a  man  a  com- 
modity which  he  knows  he  does  not  want.  To  this 
disadvantage,  all  articles  which  derive  their  value  from 
fashion  and  caprice  are  exposed  ;  and,  on  this  account, 
they  are  always  sold  at  a  higher  profit,  in  order  to  com- 
pensate for  the  additional  risk. 

2.  Stagnation  in  business  may  arise  from  a  temporary 
failure  in  production.  This  must,  of  necessity,  produce 
it;  since,  as  we  have  already  seen,  two  men  cannot  ex- 
change, unless  they  both  have  something  to  part  with  ; 
and  the  amount  and  number  of  every  man's  exchanges 
will  be  in  proportion  to  the  amount  which  he  is  alile  to 
part  with,  and  the  amount  which  others  are  able  to  odbi 
him  in  exchant^e.  Thus,  if  the  crop  of  suo;ar  should  bo 
reduced  one  half,  there  would  be  a  stagnation  in  the  su^ai 
business  ;  that  is,  there  would  be  but  half  the  quantity 
of  sugar  to  be  exchanged,  and  half  the  quantity  of  other 
things  could  be  exchanged  for  it ;  in  other  words,  half 
the  number  or  amount  of  exchanges  would  be  made. 
And,  in  general,  the  failure  of  any  crop,  or  the  diminu 


180  STAGNATION     OF    BUSINESS. 

tion  of  any  kind  of  production,  must  cause  a  stagnation 
of  business  in  that  article  itself,  and  also  in  wliatever  is 
usually  exchanged  for  it.  Thus,  also,  if  production  lan- 
guish from  civil  war,  or  from  insecurity  of  property,  ex- 
changes of  all  kinds  diminish^  towns  are  depopulated, 
harbors  are  deserted,  and  the  accumulated  treasure  of 
past  generations  insensibly  melts  away. 

3.  A  glut,  or  stagnation  of  business,  may  also  arise 
from  comparative  poverty  in  one  of  the  parties  making 
the  exchange.  If  a  nation  is  able  to  produce  but  one 
hundred  thousand  dollars'  worth  of  exports,  it  can  pur- 
chase but  one  hundred  thousand  dollars'  worth  of  im- 
ports. This,  then,  will  generally  be  the  annual  amount 
that  will  be  brought  to  its  market.  But  if,  from  any 
cause,  a  larger  amount,  say  one  hundred  and  fifty  thou- 
sand dollars'  worth,  is  brought  thither,  there  will  arise  a 
glut,  or  temporary  stagnation  of  business.  There  will 
be  fifty  thousand  dollars'  worth  more  than  can  be  ex- 
changed. The  reason  is  not,  that  they  do  not  want  the 
additional  fifty  thousand  dollars'  worth  of  the  productions 
of  other  countries,  but  that  they  have  nothing  with  which 
to  purchase  it.  Hence,  after  one  hundred  thousand  dol- 
lars'  worth  have  been  purchased,  there  will  be  sellers, 
but  no  buyers.  It  will  be  seen,  however,  that  such  a 
case  can  generally  exist  only  in  new,  small,  or  in  very 
unproductive  countries,  or  for  short  peiiods  ;  or  else 
in  respect  to  articles  of  which  the  consumption  of  the 
whole  conmiunity  is  but  small. 

4.  A  stagnation  of  business  may  be  the  effect  of  leg- 
islation. Siij)pose  the  importation  of  coffee  into  this 
country  be  a  million  pounds  per  annum.  This  must  be 
paid  for,  in  some  way,  by  the  productions  of  our  own 
industry  ;  and  the  demand  for  those  productions  to  this 
extent,  is  for  the  sole  purpose  of  paying  for  this  coffee 
There  nuisl,  of  course,  be  a  great  variety  of  exchanges 
rerpiired  to  collect  these  products,  to  bring  them  to  the 
seaports,  to  exchange  them  for  cofTee,  and  again  to  circu- 
late this  coffee  thioiighout  the  country.  Now,  let  a  duty 
be  laid  upon  coffee,  which  shall  double  its  price,  and 
thus  diu.inish-  its  consunjption   one   half.      The   demand 


LEGISLATIVE     ENACTMENTS.  18! 

for  one  half  of  the  products  by  which  it  was  i)aid  for, 
ceases,  the  (l(?tiiatid  for  cotfee,  to  this  extent,  also  ceas 
es  ;  and  the  labor  of  transportation  on  both  articles  is 
reduced  one  half.  Here  must  be  a  stagnation  of  biisi 
ness,  in  both  of  these  articles ;  and  half  the  shippiiiji| 
thus  employed,  will,  for  a  time,  be  useless.  Hence, 
there  must,  of  course,  arise  a  stagnation  of  business  ; 
that  is,  a  permanent  diminution  of  exchanges,  in  all  the 
.departments  of  industry  aflbcted  by  this  arrangement. 
The  same  effect  will  be  produced  by  any  act  of  legisla- 
tion by  which  public  confidence  is  sliaken,  the  currency 
disordered,  or  the  facilities  of  exchange  diminished. 

IV.  Of  the  effects  of  legislative  enactments  on  Ex- 
change. 

I  think  it  too  obvious  to  need  remark,  that  duties  on 
imports  can  have  no  favorable  effect  on  exchange. 
Their  only  effect  must  be,  to  raise  the  price  of  the 
products,  and,  of  course,  to  diminish  the  ability  in  both 
parties  to  exchange.  Every  one  knows  that  the  ex- 
changes between  two  places  are  diminished  by  any  nat- 
ural obstacle  to  communication.  If  a  road  were  so  bad 
tHat  it  cost  five  dollars  per  hundred  weight  to  transport 
merchandise  between  two  places,  every  one  knows  that 
exchanges  between  these  places  would  be  fewer  than 
they  would  be  if  the  road  were  improved,  so  that  trans- 
portation could  be  effected  for  twenty-five  cents  per  hun- 
dred weight.  Now,  it  makes  no  difference  whether  this 
additional  four  dollars  and  seventy-five  cents  be  the  re- 
sult of  the  badness  of  the  road,  or  of  a  transit  duty  be- 
tween the  two  places.  The  diminution  of  exchange 
which  it  causes,  will  be  precisely  the  same.  In  a  severe 
winter,  our  northern  harbors  are  closed,  for  weeks  or 
months,  by  the  ice.  This  is  a  natural  tariff,  and  imposes  a 
large  protecting  duty,  inasmuch  as  exchanges  must  be  ef- 
fected, if  they  be  effected  at  all,  at  a  vastly  greater  price 
than  in  summer.  It  is  not  generally  believetl,  that  tliis  in- 
creases the  number  of  exchanges  ;  nor  have  I  ever  heard 
it  mentioned,  as  favorable  to  domestic  industry. 

I  therefore  think  it  evident,  that  government  can  do 
nothing  to  facilitate  exchanges  by  means  of  discrimi' 
IG 


182  LEGISLATIVE    ENACTME>TS. 

nating  duties.     They  have,  however,  attenipted  to  ac 
coniphsh  this  resuk,  by  means  of  bounties  on  particular 
exports. 

The  manner  in  which  this  is  accomphshed,  is  this. 
Suppose  we  were  not  able,  profitably,  to  produce  and 
ofler  to  other  nations  in  exchange,  some  particular  arti- 
cle, say,  for  instance,  iron.  To  encourage  this  export, 
a  bounty  is  granted  on  every  ton  of  iron  exported,  ecpial 
to  the  difference  between  our  cost  of  producing  it,  and. 
that  at  which  other  nations  produce  it.  Our  producer 
can  then  sell  it  in  a  foreign  port,  as  cheap  as  the  pro- 
ducer from  another  nation.  But  where  does  this  bounty 
come  from  ?  Why,  it  is  from  a  duty  laid  on  some  othei 
import,  or  else  from  a  tax  laid  on  some  other  product. 
The  iron  worker  is  no  better  off  than  any  other  man, 
and  all  the  other  exchangers  or  producers,  or  both,  are 
just  so  much  worse  off;  and  the  value  of  capital  and 
labor  is,  by  the  whole  operation,  diminished,  as  we  have 
shown  in  the  article  on  the  effect  of  legislative  enact- 
ments upon  production.  Did  any  merchant  ever  grow 
rich  by  selling  under  cost,  for  the  sake  of  competition 
with  his  neighbor  ?  It  would  be  very  difficult  to  show 
how  a  nation  can  grow  rich  in  the  same  way.  But,  as 
the  principles,  on  which  this  discussion  depends,  have 
been  already  treated  of  in  the  article  above  alluded  to. 
J  need  not  here  repeat  them. 

If,  then,  governments  can  do  nothing  in  this  manner 
to  promote  the  business  of  exchanges,  in  what  manner 
may  exchange  be  effected  by  legislation  .'' 

We  have  said  that  exchanges  are  the  natural  result  of 
mutual  desire  and  mutual  ability.  In  what  manner  ma}' 
ihese  be  influenced  by  legislative  enactments  ? 

1.  Of  Desire.  If  by  desire  be  meant  the  original 
iiripuljes  implanted  in  the  bosom  of  man,  it  is  evideiit 
that  these  can  be  neither  increased  nor  dimiuished. 
These  are  a  fixed  quantity,  with  which  we  cannot  inter- 
fere.  These  desires,  however,  generally  remain  dor- 
mant, until  they  are  awakened  into  exercise  by  iln"  |M"eS' 
ence,  or  by  the  knowledge,  of  their  appropriate  objei^ls. 
It  IS  by  a  knowledge  of  the  existence  of  these  objects, 


INTERNAL    IMPROVF-lSrENTS.  183 

therefore,  and  of  (lie  modes  hy  which  they  may  be  ob- 
tained, that  the  desire  for  exrhaiige  is  excited.  Hence, 
it  is  phiin,  lliat  the  desire  for  exchange  may  be  in- 
creased ; 

1.  By  the  general  dilTusion  of  knowledge,  especially 
of  that  sort  of  knowledge  by  which  man  is  taught  how 
he  may  benefit  his  condition.  This  \v\\\  be  accom- 
plished, genejally,  by  a  universal  diffusion  of  the  means 
of  common  education. 

2.  By  removing  all  impediments  to  the  dilliision  of 
knowledge.  In  this  respect,  a  duty  on  imported  books. 
which  is  really  a  tax  on  knowledge,  is,  in  a  free  govern- 
ment, exceedingly  injudicious. 

3.  By  increasing  the  physical  means  for  the  dissemi- 
nation of  knowledge  and  intelligence.  This  will  be 
done  by  allowing  every  facility  for  internal  improve- 
ment ;  by  an  efficient  and  cheap  post-office  system,  per- 
vading every  portion  of  the  country,  and  bringing  to 
every  man's  door  the  information  circulating  throughoit 
the  civilized  world. 

I  do  not  know  that  a  government  can  do  more  thar 
this  to  excite  in  a  peojile  the  desire  to  exchange. 

2.  Of  Ability.  The  ability  to  exchange  depends, 
as  we  have  shown,  upon  productiveness,  tlence,  every 
means  by  which  the  productiveness  of  industry  is  in- 
creased, will  also  benefit  exchange.  These  have  al- 
ready been  alluded  to,  in  the  former  book,  and  need  not 
here  to  be  repeated. 

There  is,  however,  one  branch  of  productive  industry 
which  is  more  immediately  connected  with  exchange 
than  any  other,  and  which  deserves,  on  that  account,  in 
this  place,  a  more  minute  consideration.  I  refer  tc  in- 
ternal improvements.  On  this,  I  shall  offer  a  few  :e- 
marks. 

An  internal  improvement,  is  any  means  by  which  the 
operation  of  change  in  place  may  be  performed  at  a  less 
exjicnse  than  formerly.  It  is,  in  fact,  a  labor-saving 
machine,  peculiar  to  this  branch  of  inoustry.  Of  those 
at  present  in  use,  the  most  common  are  roads,  railways, 
and  cai\als. 


184  INTERNAL    IMPROVEMENTS. 

What  is  peculiar  to  these  machines,  is,  First,  they  are 
very  costly,  and  hence,  in  general,  require  more  capital 
than  can  be  commanded  by  a  single  individual  ;  and, 
theiefore,  must  be  owned  by  a  number  of  persons  asso- 
ciated  together.  Secondly  :  they  must  pass  through  the 
lands  of  various  individuals  who  have  no  special  interest 
in  them,  and  are  thus  liable  to  interfere  with  the  right 
of  |)roperty.  This  interference  can  be  allowed  only  by 
the  whole  community  ;  and,  hence,  there  arises  a  neces- 
sity for  legislative  enactment,  granting  permission  to  this 
effect. 

Now,  inasmuch  as  such  machines,  if  properly  con- 
structed and  skilfully  managed,  are  greatly  for  the  ben- 
'^nt  of  the  whole  society,  it  is  manifestly  the  duty  of 
society  to  grant  all  suitable  facilities  for  constructing 
them.  Inasmuch,  however,  as  they,  like  any  other 
privileges,  are  liable  to  be  abused,  and  may,  in  the  end, 
injure  the  interests  which  they  were  intended  to  benefit, 
It  becomes  a  legislature,  on  all  such  occasions,  to  re- 
serve, at  the  outset,  the  right  of  visitation  ;  the  power 
to  modify  or  amend,  on  ecpiitable  terms,  the  privileges 
granted,  in  such  manner,  as  the  exigencies  of  the  public 
may  require. 

Whether  a  government  should  itself  undertake  the 
work  of  internal  improvement,  is,  however,  not  so  clear. 
On  this  subject,  it  may  be  suggested  : 

1 .  If  it  will  not  be  profitable  ;  that  is,  if  capital  thus 
invested  will  not  be  as  productive  as  that  invested  in 
other  employments,  it  ought  not  to  be  undertaken  by  the 
public,  because  the  capital  thus  invested  must  be  taken 
from  other  employments  ;  that  is,  it  must  be  taken  from 
a  more  productive,  to  be  invested  in  a  less  productive 
employment.  If  it  be  said,  though  it  be  not  itself  pro- 
ductive, it  may  enrich  the  district  in  which  it  is  con- 
structed ;  the  answer  to  this  is,  then  let  that  district  pay 
for  it,  unless  it  can  be  shown  to  be  either  wise  or  just, 
to  impoverish  one  district,  for  the  purpose  of  enrichmg 
another. 

2.  If  it  will  be  productive,  private  associations,  in  an 
intelligent  community,  will,  with  proper  encouragement, 


INTERNAL    IMPROVEMENTS.  l85 

be  ready  to  undertake  it.  And  of  the  question  of  prof- 
itableness, private  individuals  w  ill  judge  much  more  ac- 
curately than  a  government,  because  the  facts  are  equal- 
I}'  known  to  both  ;  the  degree  of  intelligence  is  likely  to 
be  as  great  in  the  one  case  as  in  the  other  ;  and  the  one 
party  can  be  influenced  by  no  motive  but  self-interesi, 
which  is  here  also  the  interest  of  the  public  ;  while  the 
other  party  may  be  influenced  by  party  politics,  section- 
al jealousy,  love  of  power,  and  a  thousand  disturbing 
causes. 

3.  A  work  of  this  sort  will  be  executed  at  much  less 
expense  by  private  individuals,  than  by  a  government. 
The  costliness  of  all  public  works  is  everywhere  pro- 
verbial. The  greater  the  number  of  intermediate  agen- 
cies by  which  any  work  is  performed,  the  more  imper- 
fectly is  the  work  done,  and  the  greater  is  the  unneces- 
sary expenditure.  Now,  government  is  itself  an  agent. 
It  must  perform  the  work  by  means  of  another  set  of 
agents.  Under  these  may  be  half  a  dozen  others,  in  the 
form  of  contractors,  and  sub-contractors.  All  these  un- 
necessary agencies  must  be  paid  out  of  the  public  purse, 
and  their  accounts  adjusted  by  those  who  have  no  spe- 
cial motive  to  encourage  economy.  All  this  is  reversed, 
when  those,  who  conduct  the  work,  pay  for  it  them- 
selves, and  whose  profits,  in  the  end,  must  depend  upon 
the  goodness  of  the  work,  and  the  cheapness  of  its  ex- 
ecution. 

4.  A  work  of  this  kind,  when  completed,  will  be 
more  faithfully  superintended  by  private,  than  by  pub- 
lic owners.  The  private  owner  knows  that  he  mu.-t 
conduct  his  operation  economically,  and  maintain  the 
favor  of  the  public,  or  else  he  will  gain  nothing  by  his 
investment.  A  government  is  under  no  such  saluiar} 
check. 

5.  But  a  still  stronger  objection  to  the  confiding  o' 
such  works  to  the  public,  is,  the  amount  of  patronage 
which  it  must,  of  necessity,  place  in  the  hands  of  a  gov- 
ernment. The  power  to  make  roads  and  canals  when- 
ever it  pleased,  and  to  employ  upon  them  whomsoever 
It  pleased,  once  placed  in  the  hands  of  a  party,  would 

16* 


186  INTERNAL    IMPROVEMENTS. 

perpetuate  it  in  office  forever,  in  spite  of  any  violation 
of  right  ^\llich  it  might  perpetrate,  or  any  corniption  of 
which  it  might  be  guihy.  Tliere  is  too  mucli  reason  to 
fear,  that  a  laige  portion  of  the  investment  in  internal 
improvement  made  by  our  State  authorities  will  prove  an 
almost  total  loss. 

For  these  reasons,  it  seems  to  me  that  the  safer  rule 
would  be  to  leave  works  of  this  kind  to  be  executed  by 
private  corporations.  This,  however,  is  a  general^  and 
not  an  universal  rule.  Works  may  be  of  such  magni- 
tude, or  tney  may  be  of  so  great  national  importance, 
that  they  must  be  executed  and  controlled  by  the  public 
at  large.  These  cases  are,  however,  I  apprehend,  the 
exceptions.      The  rule  I  suppose  to  be  as  above  stated. 

There  are,  however,  other  improvements,  of  very  great 
importance,  the  superintendence  of  which  belongs,  of 
necessity,  to  a  government  ;  it  is  that  class  of  improve- 
ments which  reduce  the  expense,  and  lessen  the  risk  of 
external  commerce.  Among  these,  the  most  important 
ire  the  removal  of  obstructions  from  harbors  ;  the  loca- 
tion of  buoys  and  the  erection  of  light-houses  ;  the  ex- 
ecution of  accurate  surveys  ;  and  the  publication  of  ac- 
curate charts  of  the  whole  coast  of  a  country.  The 
more  perfect  these  become,  the  less  is  the  risk  of  ship- 
wreck, in  leaving  and  approaching  a  coast  ;  of  course, 
the  less  is  the  cost  of  insurance,  and  the  less  the  price 
of  every  thing  imported  and  exported.  Hence,  a  nation, 
oflering  these  advantages,  becomes  a  better  market  for 
all  other  nations,  and  they  will  the  more  readily  resort  to 
her  for  exchanges.  Improvements  of  this  sort  are  one 
of  the  most  economical  forms  of  national  investment ; 
ihcy  frequently  save,  in  a  single  year,  the  whole  cost  of 
their  election.  The  loss  of  property  and  life,  by  ship- 
wreck, on  almost  every  coast,  is  enormous.  The  great- 
er par  of  this  loss  might  probably  be  saved,  by  judicious 
expenditure  upon  improvements  on  the  coast,  and  proper 
regulations  for  the  government  of  pilots. 

3.  I  have  said,  above,  that  exchanges  will  be  efTected 
bv  the  security  or  insecurity  of  the  right  of  property. 
Hence,  leglilators  can  do  much  to  promote  the  prosper- 


TREATMENT    OF    FOREIGNERS-  1S7 

ity  of  a  crnntiy,  by  tlie  enaciiiicnt  of  wholesome  laws, 
by  wliich  contracts  shall  be  enforced,  wrongs  redressed, 
and  injuries  prevented.  And  tb^y  sho-i'd  be  specially 
careful  that  they  are  not  guilty,  in  then-  social  character, 
of  what  they  forbid  to  others  in  their  individual  charac- 
ter. Tiiey  should  be  scrupulous  in  the  observance  oi 
individual  right,  and  should  remember,  that  a  single  in- 
d\\  idual  is  as  important  as  a  nation,  when  the  questi(jn 
of  justice  is  concerned. 

And  the  same  principles  apply  to  the  treatment  of 
foreigners.  No  foreigner  can  traffic  with  another  coun- 
try, without  placing  his  property  in  the  power  of  the  cit- 
izens of  that  country.  If  his  rights  be  respected,  and 
he  be  assured  of  the  benefit  of  equal  laws,  he  will  invest 
his  i)roi)erty  abroad  as  freely  as  at  home  ;  and  will,  with 
confidence,  and  on  the  most  moderate  terms,  eflect  ex- 
changes to  as  great  an  extent  as  he  is  able.  Hence, 
under  these  circumstances,  exchanges  will  be  effected 
to  the  greatest  advantage  of  both  countries,  and  they 
will  naturally  flow  from  other  countries  to  such  an  one  as 
this.  And  the  reverse  will  be  the  case,  if  the  rights  of 
foreigners  are  disregarded.  Other  nations  will  desire 
their  custom,  if  we  do  not.  Commerce  will  leave  our 
shores,  and  we  shall  be  left  in  the  well-known  condition 
of  the  dog  in  the  manger.  The  fable,  1  believe,  infornfis 
U5  that  hf-  was  starved  to  death. 


CHAPTER  SECC)?JD.    • 

r>F  EXCHANGE    BY  MEANS    OF  A  METALLIC    CURRENCY 


SECTION  I. 

OF    THE    USE    OF    A    CIRCULATING    MEDIUM. 

In  the  preceding  chapter,  I  have  endeavored  to  illus- 
trate the  general  principles  of  exchange,  and  the  condi- 
tions by  which  it  is  regulated.  Exchange,  however, 
like  every  other  benefit  which  we  enjoy  in  this  life,  can 
only  be  accomplished  by  labor.  But  in  this,  as  in  ev- 
ery other  case,  it  holds  true,  that  a  great  advantage  is 
gained  by  increasing  the  productiveness  of  labor  ;  that 
is,  by  enabling  the  same  individuals,  by  the  same  labor, 
to  accomplish  a  greater  amount  of  exchange.  And  it 
holds  true  in  this,  as  in  other  cases,  that  the  result  of 
labor  is  more  perfect,  just  in  proportion  as  the  produc 
liveness  of  labor  is  increased. 

But  in  order  to  accomplish  this,  an  intermediate  in- 
strument or  tool  must  be  used.  A  man  who  cannot 
split  a  log  by  the  direct  use  of  his  hands,  will  find  no 
difliculty  in  splitting  it  with  a  beetle  and  wedges.  So, 
also,  he  who  would  find  it  imj)Ossible  to  effect  a  dozen 
exchanges  in  a  day,  if  he  insisted  on  exchanging  the 
products  themselves,  will  find  no  difficulty  in  doing  it  in 
a  few  minutes,  by  means  of  the  instrument  which  has 
been  invented  for  this  purpose,  and  he  will  not  only  thus 
do  it  in  a  shorter  time,  but  also  on  better  terms,  and 
with  much  greater  exactitude. 

This  instrument,  of  so  much  importance  in  exchange^ 
is  money;  to  a  consideration  of  the  nattue  and  uses  of 
which,  we  shall  devote  this  and  the  succeeding  chapters 
The  present  chapter  will  be  confined  to  the  conoidera 


DIFFICULTIES    OF      EXCHANGE    IN    KIND.  189 

tion  of  a  metcUic  cnnency.  We  corninence  uiili  llie 
use  of  a  circulating  niediiiin. 

In  treating  of  this  subject,  we  shall  first  consider  the 
difficulties  which  must  necessaiily  embarrass  exchange 
in  kind;  and,  secondly,  the  manner  in  which  these  difti- 
cultics  are  removed  by  means  of  a  circulating  medium, 

1.  The  difficulties  ivhick  attend  upon  exchange  in 
kind 

By  exchange  in  kind,  I  mean  exchange  of  commodity 
for  commodity,  as  when  a  farmer  exchanges  wlieat  for 
sugar,  or  pork  for  iron,  &c. 

1.  Suppose  a  producer  to  have  prepared  his  product 
for  consumption.  If  he  be  obliged  to  exchange  in  kind, 
it  may  be  a  long  time  before  he  finds  another  person 
who  desires  the  article  which  he  has  created.  If  he  be 
obliged  to  wait  long,  his  product,  if  perishable,  v\ill  be 
either  destroyed  or  deteriorated.  He  must  go  in  search 
of  a  purchaser  ;  and  if  he  at  length  find  one,  he  may 
have  consumed,  in  the  search,  as  much  lime  as  the  arti- 
cle originally  cost.  This  must  be  added  to  the  cost  of 
the  article,  or  else  he  will  be  a  loser.  But,  by  this 
additional  cost,  the  product  is  no  better  ;  it  is  only  dear- 
er. This  must,  of  course,  decrease  the  demand  ;  and 
hence,  by  all  this  additional  cost,  both  parties  are  poorer. 

2.  But  it  is  to  be  remembered,  that  the  producer  not 
only  wants  to  part  with  his  product,  but  also  to  part  with 
it  for  some  definite  object  of  desire.  He  who  has  rais- 
ed wheat,  does  not  wish  simply  to  part  with  his  wheat, 
but  also  to  receive  in  exchange  for  it,  lea,  or  cofiee,  or 
iron,  or  salt,  or  clothing.  He  must,  therefore,  in  order 
to  effect  the  exchange  which  he  desires,  not  only  find 
S(<me  one  who  wishes  for  wheat,  but  also  some  one  who 
is  able  to  give  him,  in  return,  the  precise  product  he 
desires.  If  he  desire  clothing  in  return,  it  will  not  be 
sufiicient  to  find  some  one  who  offers  him  bread,  or 
shoes,  or  butcher's  meat.  This,  also,  increases  the  dif- 
ficulty of  exchange,  and,  of  course,  the  labor  and  the 
cost  necessary  to  efi'ect  it. 

3.  But  this  is  not  all.  Men  who  wish  to  exchange, 
do  not  always  wish  to  exchange  in   equal   amounts.     A 


190  DIFFICULTIES    OF    EXCHANGE    IN    KIND. 

grazier  who  brings  a  fatted  ox  to  market,  may  find  per- 
sons enough  who  want  a  few  pounds  of  beef,  but  very 
few  who  want  a  whole  ox.  The  grazier  cannot  divide 
his  ox,  and  give  a  part  of  it  for  a  few  pounds  of  coffee 
or  tea  ;  nor,  probably,  does  he  require  one  fourth  of  the 
value  of  the  ox,  in  any  article  which  can  be  purchased 
in  the  town  where  it  may  be  sold.  He  wishes  to  obtain, 
by  the  sale  of  the  ox,  additional  provender  for  the  sup* 
port  of  his  remaining  herd.  This  he  cannot,  perhaps, 
procure,  except  in  the  country  ;  or  if  he  could  procure 
it,  the  merchant  who  owns  the  provender,  would  not 
want  a  whole  ox  for  butcher's  meat.  Thus,  exchanges 
would  be  arrested  ;  or  must  be  made  very  rarely,  and  at 
great  cost,  and  under  every  possible  disadvantage. 

4.  Such  are  the  difficulties  which  attend  upon  the 
exchange  o^  material  products.  But  it  will  be  manifest, 
at  once,  that  material  products  give  rise  to  but  a  small 
part  of  the  exchanges  which  are,  by  necessity,  made 
among  men.  One  great  article  to  be  exchanged  is  labor. 
This  every  man  produces,  and  must  produce,  by  the 
law  of  his  nature  ;  and  this,  every  man  is  able  to  offer 
in  exchange  for  the  objects  of  desire.  Now,  were  ex- 
change only  in  kind,  a  man  who  had  nothing  but  labor 
or  skill  to  offer,  would  not  be  able  (o  labor  for  those 
who  desired  his  labor  and  who  would  give  him  the  great- 
est wages  for  it  ;  but  he  must  labor  for  those  who  were 
willing  to  give,  in  ever  so  small  quantity,  the  articles 
which  he  needed  for  his  support.  'I'he  laborer  in  at) 
iron-foundry  would  be  obliged  to  take  his  pay  in  iron. 
But,  as  he  could  not  exchange  his  iron  with  the  baker, 
the  butcher,  or  the  clothier,  he  must  go  and  work  for 
those  producers,  for  any  compensation  by  which  he 
might  obtain  for  himself  the  necessaries  of  life.  The 
workman  of  the  baker  must  take  his  pay  in  bread.  But 
he  would  want  only  a  small  |)ortion  of  bread  for  himself, 
and  he  must  spend  his  time  in  exchanging  it  for  what- 
ever else  he  needed.  If  he  could  not  thus  procure  tea, 
cofftie,  clothing,  and  other  necessaries,  he  must  leave 
his  occupation,  and  work  for  those  who  wished  to  ex- 
change them  for  his  labor.      The  physician  must  take  his 


UTILITY    OF     A    CIRCULATING    MEDIUM.  19! 

fee  in  iron,  or  bread,  or  bmcher's  meat  ;  and  if  any  of 
his  patients  produced  vvliat  he  did  not  want,  he  iinist  ei- 
ther attend  tiieni  gratuitously,  or  tiiey  must  die  without 
assistance.  Besides  this,  ll)ere  are  many  products  in- 
capable of  division.  If  a  hundred  men  engaged  in 
building  a  ship  or  a  house,  how  would  they  take  their 
pay  in  kind,  without  taking  the  ship  in  pieces,  and  thus 
rende/nig  their  work  wholly  useless  ? 

5.  Hence,  were  exchange  only  in  kind,  there  would 
be  no  division  of  labor,  except  in  its  most  imperfect 
form.  No  man  could  perfect  himself  in  any  one  art  ; 
because,  by  the  exercise  of  that  alone,  he  could  not 
possibly  procure  the  means  of  sustenance.  I  have  al- 
ready shown,  how  impossible  it  would  be  for  him  to  do 
this  by  the  practice  of  any  one  of  the  ordinary  mechan- 
ical trades.  How  much  more,  when  these  trades  are 
minutely  subdivided.  I  have  elsewhere  stated  the  ad- 
vantages of  this  subdivision.  But  how  could  this  be 
effected,  if  exchange  were  made  only  in  kind  ?  Sup- 
pose a  man  employs  his  time  in  the  single  process  of 
heading  pins,  or  in  forming  the  rivets  for  the  handles  oi 
pen-knives  ;  how  could  he  subsist  by  exchange  in  kind 
Who  would  give  him  what  he  needed  for  subsistence 
for  his  pin-lieads,  or  for  his  knife-handle  rivets  .''  Hence, 
division  of  labor,  so  essential  to  the  productiveness  of 
human  industry,  to  the  progress  of  society,  and  to  the 
use  of  natural  agents,  could  exist  only  in  its  most  ele- 
mentary forms,  were  exchange  limited  in  the  manner  we 
have  supposed. 

And,  if  it  be  said  that  this  inconvenience  coi.ld  be 
avoided  by  establishments  for  barter,  it  will  at  once  ap 
pear  that  these  could  remedy  it  only  in  part.  They 
could  assist  in  the  exchange  of  nothing  but  material  prod- 
ucts, and  of  those  which  weie  not  rapidly  perishable. 
They  could  present  no  relief  for  exchanges  of  labor. 
Hence,  they  would  do  almost  nothing  to  facilitate  divis- 
ion of  labor,  and  could  carry  forward  the  progress  of  so- 
ciety in  no  respect  beyond  its  most  rude   l)ea;iiniings. 

From  such  causes  as  these,   arises  the  necessity  of  a 
circulating^  medium  ;  and  it  will  be  easily  seen,  in  what 


192  UTILITY    OF    A    CIRCULATING    MEDIUM. 

manner,    by   means  of  a  circulating   medium,   they  are 
remedied. 

1.  Suppose  that  the  producer  can  always  exchange 
his  product,  not  for  the  article  which  he  immediately 
wants,  but  for  some  other  article  which  is  universally 
wanted,  and  wanted  at  all  times,  and  in  all  quantities. 
As  soon  as  the  producer  has,  by  exchange,  possessed 
himself  of  this  commodity,  he  may  then,  on  account  of 
its  universal  desirableness,  easily  procure,  by  another 
exchange,  whatever  he  may  need.  In  this  manner,  by 
means  of  two  exchanges  made  at  the  same  instant,  the 
labor  of  days  or  of  weeks  may  be  accomplished.  Thus, 
if  salt  were  this  commodity,  and  every  one  wanted  salt 
in  all  quantities,  at  all  times,  and  at  a  fixed  value  ;  by 
exchanging  every  thing  for  salt,  and  then  exchanging  salt 
for  whatever  we  might  desire,  the  labor  of  exchanges 
would  be  vastly  diminished. 

2.  This  convenience,  however,  will  be  much  increas- 
ed, if  the  article  of  universal  desire  be  small  in  bulk  ; 
because,  in  this  case,  much  of  the  labor  of  transporta- 
tion will  be  avoided.  Were  the  lace-maker  obliged  lo 
exchange  his  lace  for  salt,  he  would  be  obliged  to  fur- 
nish himself  with  a  cart,  in  which  to  receive  his  pay- 
ment. And  thus,  in  general,  instead  of  a  purse,  in 
which  to  carry  our  money,  we  should  require,  for  this 
purpose,  the  use  of  a  wagon  and  horses. 

3.  If  this  circulating  medium  be  also  minutely  divisi- 
ble, it  will  possess  still  greater  conveniences.  The 
producer  may  then  part  with  all,  or  with  a  part  o  his 
product  ;  and  he  can  procure,  with  a  circuhiting  me- 
dium, as  small  a  portion  of  that  which  he  wishes  in  ex- 
change, as  he  may  choose.  The  farmer,  instead  ol 
exchanging  one  part  of  his  wheat  for  tea,  another  part 
for  coffee,  and  another  part  for  clothing  ;  or  else,  ex- 
changing it  all  for  tea,  and  then  endeavoring  lo  find  cus- 
tomers for  his  tea,  may  exchange  it  all  for  the  circulat- 
ing medium,  procure  as  much  of  each  as  he  pleases,  or, 
if  he  choose,  make  no  further  exchange  whatever. 

4.  'J'li6  case  is  still  stronger,  when  labor  is  one  of 
the  articles  to  be  exchanged.      The  laborer  will  now  nc 


UTILITY    OF    A    CIRCULATING    ilEDIUM.  193 

longer  be  obliged  to  labor  at  any  price,  for  him  who  is 
able  to  give  hiin  in  exchange  what  he  imniediatcly 
wants  ;  but  he  may  labor  for  any  one  who  will  give  liim, 
in  return,  this  object  of  general  desire.  Hence,  lie  is 
now  at  liberty  to  labor  for  him  who  will  give  him  the 
best  wages  ;  that  is,  where  his  industry  and  skill  will  be 
employed  most  advantageously  to  himself.  With  this 
he  can  procure  whatever  he  wants,  in  such  portions  as 
he  may  desire. 

5.  The  practicability  of  the  division  of  labor  now 
becomes  immediately  apparent.  If  the  laborer  be  paid 
in  the  article  of  universal  desire,  it  makes  no  difference 
whether  the  person  who  produces  what  he  wants,  needs 
or  does  not  need,  his  particular  product.  He  wants  ihe 
object  of  universal  desire,  and  this  is  enough  ;  for,  by 
this,  the  laborer  can  effect  exchanges  W'ith  him  or  with 
any  one  else.  If  he  can  procure  this  circulating  me- 
dium by  means  of  pin-heads,  or  knife-handle  rivets,  this  is 
all  that  he  wants.  He  is  now  as  independent  as  though 
he  produced  that  which  every  one  wants  ;  since,  by 
means  of  what  he  produces,  he  can  procure  that  which 
every  one  wants.  Thus,  we  see,  that  every  man  is,  in 
this  manner,  able  to  devote  himself  to  that  in  which  his 
skill  will  be  most  productive  to  himself.  And  all  men 
thus  making  the  first  exchange  in  this  object  of  universal 
desire,  all  are  equally  independent  ;  and  all  are  able,  in 
the  most  successful  manner,  to  avail  themselves  of  the 
fruits  of  their  own  industry. 

Now,  whatever  it  is  that  performs  the  office  of  iluig 
facilitating  exchanges,  is  called  a  circulating  medium. 
So  great  has  been  the  necessity  of  some  such  instru- 
ment, that  even  the  rudest  nations  have  always  been 
found  adopting  some  such  contrivance  with  advantage. 

Thus,  the  natives  of  the  African  coast  were  formorly 
in  the  habit  of  using,  as  money,  small  white  sea-shells, 
denominated  cowries. 

In  pastoral  nations,  cattle  were  frequently  used  as  g 
circulating  medium.  Thus  we  are  told^  by  Homer,  that 
fh**  armor  of  Diomede  cost  nine  oxen.  Sheep,  proba- 
bly, were  also  used  for  the  same  purjiose.      The  ordi- 


194  UTILITY     OF    A    CIRCULATING    InEOIUM 

nary  mode,  among  such  nations,  of  estimating  the  uealili 
of  an  individual,  was  by  the  number  of  his  flocks  and 
herds.  Hence,  probably,  arose  the  custom,  among  the 
Greeks  and  Romans,  of  stamping  their  earliest  coin  with 
the  figure  of  an  ox  or  a  sheep.  Hence,  also,  the  Latin 
word  pecunia,  money,  is  supposed  to  be  derived  from 
pecus,  a  sheep. 

From  reasons  which  will  easily  suggest  themselves, 
all  other  substances  sooi:  gave  place  to  the  metaLi,  as  a 
circulating  medium.  Different  metals  were,  however, 
used  at  first  by  different  nations.  The  first  instance  on 
record,  of  the  use  of  metals,  as  a  medium  of  exchange, 
is  found  in  Genesis  23  :  16.  "  And  Abraham  heark- 
ened unto  Ephron.  x\nd  Abraham  weighed  to  Ephron 
ihe  silver  which  he  had  named,  in  the  audience  of  the 
sons  of  Heth,  four  bundled  shekels  of  silver,  current 
money  with  the  merchant."  We  see  that  at  this  time 
the  money  was  weighed  ;  that  is,  was  not  paid  by  tale. 
I  presume  that  the  metals  were  used  as  a  circulating 
medium  for  a  long  period  before  they  were  fashioned 
into  coin.  At  a  much  later  period,  the  baser  meials 
were  used  as  money  by  the  Greeks  and  Romans.  Thus 
the  Lacedemonians,  under  Lycurgus,  established  iron 
as  the  circulating  medium.  The  Romans  used  copper 
or  brass  in  the  early  ages  of  their  history.  Hence,  (zs 
signifies,  in  Latin,  both  brass  and  money.  These,  how- 
ever, in  all  places,  have  long  since  given  place  to  gold 
and  silver,  which  are  hence  denominated  the  precious 
metals.  These  are  now  used  for  the  purposes  of 
money,  throughout  the  known  world,  except  among  the 
rudest  and  most  barbarous  tribes.  Copper  is  used  only 
in  the  payment  of  sums  less  in  value  than  the  lowest 
denommiition  of  silver  coin.  In  some  countries,  both 
gold  and  silver  are  made  a  legal  tender  in  jiayment 
of  debts  ;  in  other  countries,  only  one  of  these  metals  is 
used.  In  this  country,  both  are  thus  established  by 
law.  In  Great  Britain,  gold  is  the  only  legal  tender  for 
all  sums  greater  than  twenty  shillings,  and  silver  for  all 
sums  of  less  amount.  Copper  is  used  onl)  in  pa}ineat 
of  sums  less  than  sixpence. 


QUALITIES    OF    A    CIRCULATING    MEDIUM.        193 


SECTION  II. 

OF      THE      QUALITIES      NECESSARY      TO      THAT      WHICH 
CONSTITUTES    THE    CIRCULATING    MEDIUM. 

In  order  to  render  any  substance  available  as  a  circu- 
lating medium,  tbe  essential  quality  required  is,  that  it 
be  universally  desired  as  such.  Its  object  is  to  facili- 
tate exchanges,  but  it  can  accomplish  this  object,  only 
by  means  of  the  willingness  of  the  whole  community  to 
exchange  for  it  every  thing  which  they  are  willing  to 
part  with.  If  one  individual  of  a  community  prefer  one 
substance,  and  another  individual  anotlier,  exchanges 
will  be. embarrassed,  by  unnecessary  multiplication,  and 
by  the  useless  consumption  of  lime.  And  if,  on  the 
other  hand,  any  substance  be  thus  universally  desired  ; 
on  account  of  the  great  facilities  which  it  offers,  and  the 
great  saving  of  labor  which  it  effects,  it  will  be  immedi- 
ately used  for  this  purj)ose.  And  it  will  be  so  used, 
without  any  agency  of  government  ;  and  even  although 
a  government  did  not  exist  ;  just  as  a  man  will  use  any 
other  instrument  for  increasing  the  productiveness  of  his 
labor  as  soon  as  he  can  procure  it  ;  simply  for  the  rea- 
son that  it  is  for  his  advantage. 

If  the  exchanges  of  a  country  were  wholly  internal,  it 
would  he  sufficient  that  such  a  circulating  medium  were 
universally  acceptable  in  that  country  alone.  But,  inas- 
much as  every  nation  has  important  and  extensive  ex- 
changes with  other  nations,  it  is  an  additional  advantage 
to  have  the  same  sul)stance  used  as  a  circulating  medium 
by  all.  We  have  already  seen,  that  that  exchange  is 
the  most  profitable  for  a  country,  in  wiiich  it  exports 
what  is  relatively  most  abundant  at  home,  and  imports 
that  which  is  relatively  most  wanted  at  home  ;  and  im- 
ports it  from  that  country  in  which,  what  it  exports  is 
most  wanted,  and  what  it  imports  is  most  abundant. 
Now,  it  is  evident,  that  the  circulating  medium  may  be 
acounulaied  in  any  country,  so  that  it  shall  be  relatively 
lower  in  price  than  other  commodities.      Thius,  ^he  pre- 


1S5         QUALITIES    OF    A    CIRCULATING    MEDIUM. 

cioiis  metals  may  be  so  abundant  in  tbis  country,  tbat  a 
mercbant  can  procure  more  iron  in  Russia  by  sending  a 
given  amount  of  silver,  tban  by  sending  tbe  flour  wbich 
would  here  be  equal  in  value  to  tbe  silver.  ■  It  is,  ibere- 
t'ore,  for  bis  advantage  to  send  tbe  silver,  and  it  is 
equally  for  tbe  advantage  of  bis  country.  And,  for  tbe 
same  reason,  if  in  tbis  country  ibere  be  a  relative  scar- 
city, it  will  be  for  tbe  advantage  of  otber  nations,  as 
well  as  for  our  advantage,  that  they  should  send  silver  in 
exchange  for  our  products.  In  tbis  manner,  exchanges 
are  made,  of  that  which  is  least  wanted  by  both  parlies, 
for  that  which  is  most  wanted  by  both.  This  enables 
both  parties  to  supply  themselves  at  the  lowest  rates. 

Besides,  it  is  very  desirable  that  tbe  value  of  the 
circulating  medium,  be  as  little  as  possible  liable  to  fluc- 
tuation. Now  if  tbe  same  substances  be  used  in  all  tbe 
civilized  world,  this  fluctuation,  if  not  absolutely  pre- 
vented, will  be  so  restricted,  as  to  produce  tbe  least 
possible  amount  of  evil.  When  exchanges  between 
countries  are  frequent  and  numerous,  and  tbe  prices  of 
all  commodities  are  universally  known  by  the  merchants 
of  both,  as  specie  may  be  sent  abroad  with  very  little 
cost  of  transportation,  a  very  slight  advance  in  its  rela- 
tive value  will  cause  it  to  flow  in  from  otber  countries, 
and  a  very  slight  surplus  will  cause  it  to  flow  to  other 
countries,  until  the  common  equilibrium  be  restored.  In 
this,  we  see  in  what  manner  the  universal  employment 
of  tbe  same  substances,  by  all  nations  holding  intercourse 
with  each  other,  will  be  an  advantage  to  ail  ;  inasmuch 
as  it  will  prevent  any  great  fluctuation  in  their  relative 
value  in  any  particular  country. 

While,  however,  it  is  tbe  fact,  that  any  thing  which  is 
thus  universally  acceptable  will  be  used  as  money,  there 
are  various  circumstances  on  which  tbis  acceptableness 
depends.     Some,  of  these  are  the  following  : 

1.  Its  cost,  or,  in  otber  words,  tbe  amount  of  labor 
necessary  to  its  production,  must  be  as  invariable  as  pos- 
sible. Hence,  it  could  not  be  a  vegetable  product,  be- 
cause the  variations  in  tbe  productiveness  of  labor  thus 
employed  are   very   great.      An   abundant  harvest  pro- 


QUALFTIES     OF    A    CIRCULATING    MEDIUM.         107 

duces  a  rapid  fall,  and  a  famine  produces  a  rapid  rise,  in 
the  price  of  wheat.  On  iliis  account,  a  metal  is  prcfe/-- 
able  ;  because,  here  the  amount  produced  is  duectly  an(l 
immediately  dependent  on  the  labor  employed  in  produc- 
ing it,  and  is  less  liable  to  be  influenced  by  dlsuubing 
forces. 

2.  It  should  be  an  article  of  high  price  ;  that  is,  with- 
in a  small  bulk,  it  should  concentrate  a  large  amoinit  of 
value,  or  represent  a  large  amount  of  labor.  'I'his  is. 
of  course,  a  great  advantage,  by  saving  the  labor  of 
transportation.  Every  one  sees  that  the  commerce  of 
the  world,  at  its  present  state,  must  instantly  cease,  if 
we  were  obliged  to  exchange  our  gold  and  silver  for  the 
iron  money  of  Lycurgus. 

.Yet,  to  this  remark  there  is  a  limit.  As  a  substance 
may  not  be  of  a  price  sufficiently  high,  so  it  may  also  be 
of  a  price  too  high  for  the  purposes  of  money.  Pre- 
cious stones  are  minerals,  and  they  cost  all  the  price  at 
which  they  are  sold  ;  but  they  are  too  dear  to  be  used 
for  this  purpose  ;  that  is,  though  they  might  answer  for 
the  exchange  of  great  values,  yet,  for  all  common  ex- 
changes, they  would  be  utterly  unsuitable,  because  they 
would  be  of  so  small  bulk,  as  to  be  very  easily  lost. 

3.  The  substance  must  be  capable  of  division,  with- 
out loss  of  value.  As  it  is  desirable  that  provision  be 
made  for  facilitating  all  sorts  of  exchanges,  the  substance 
used  as  money,  should  be  capable  of  division  into  such 
portions  as  may  suit  the  convenience  of  every  one,  with- 
out itself  suffering,  by  this  division,  any  diminution  of 
value.  On  this  account,  also,  the  precious  stones  would 
be  unsuitable  for  this  purpose,  because  their  value  is  nut 
proportional  to  their  size.  A  large  diamond  is  worth 
several  times  its  weight  of  small  diamonds.  If  it  bo 
divided,  its  value  is  very  greatly  diminished  ;  and  liav- 
ing  been  once  divided,  its  value  can  never  be  restored. 
On  the  contrary,  a  lump  of  gold  may  be  divided  into  one 
hundred  pieces,  and  the  value  of  all  the  pieces  together, 
is  equal  to  the  original  value  of  the  whole.  They  may, 
if  occasion  require,  be  again  united  into  one  lump,  anJ 
the  value  of  the  whole  is  the  same  as  before. 

*      17* 


198        QUALITIES    OF    A    CIRCULATIKG    MEDIUM. 

4.  The  substance  should  be  of  such  a  nature,  that  it 
can  be  easily  verified  ;  thai  is,  it  should  be  susceptible 
of  such  preparation,  that  every  one  can  readily  assure 
himself  of  its  purity  and  weight  ;  that  is,  of  its  value. 
Unless  this  can  be  done,  at  every  exchange,  every  one 
must  examine  and  try  every  piece  by  itself.  This  would 
consume  much  time,  would  require  the  possession  of 
great  skill  in  every  individual,  and  would,  by  its  frequent 
repetition,  soon  wear  away  the  substance  itself.  Hence, 
it  is  of  advantage  that  the  metals  used  for  money  should 
be  peculiar  in  their  weight  and  color,  and  that  their  ap- 
pearance should  attract  attjention,  so  that  their  peculiari- 
ties may  be  easily  learned  and  distinguished.  The  bril- 
liant lustre  of  silver  and  gold,  therefore,  adds  very  much 
to  their  fitness  for  coin.  Their  weight,  also,  presents  a 
ready  means  for  the  detection  of  adulteration.  Platina, 
which  is  used  in  Kussia  for  the  purpose  of  money,  has 
the  advantage  of  both  of  them  in  weight  ;  but  it  has  no 
lustre,  and,  in  appearance,  it  very  much  resembles  the 
baser  metals.  This  will  be  an  objection  to  its  universal 
acceptableness. 

5.  It  should  be  as  little  as  possible  liable  to  decay. 
Were  it  easily  destructible,  great  losses  would  constantly 
occur  ;  as  the  loss  must  fall  upon  the  individual  in  w  hose 
hands  it  happened  at  the  time  to  be.  And  besides,  it 
would  be  fiom  this  cause  liable  to  so  great  fluctuation  in 
value,  that  it  could  never  be  used  as  a  circulating  medi- 
um. Were  fish  or  wheat  the  circulating  mediun),  since 
both  are  liable  to  rapid  decay,  a  change  of  weather  n)ight 
fre(]uenily  ruin  a  man.  No  one  would  exchange,  at  such 
hazards,  for  the  circulating  mediiun,  and  all  exchange 
would  be  made  in  kind.  Could  the  circulating  medium 
always  bear  the  same  relative  price  to  other  commodities, 
it  would  probably  be  advantageous.  But  as  this  is  im- 
possible, it  is  manifest,  that  that  commodity  w^iich  is 
lidble  to  the  least  fluctuation,  is,  by  this  circumstance, 
the  best  adapted  to  this  purpose. 

6.  As  we  sometimes  desire  to  make  small  and  some- 
times large  exchanges  ;  and,  as  the  substance  best  adapt- 
ed to  the  one  is  not  always  best  adapted  to  the  other,. 


QUALITIES     OF    A    CIKC'ULATING    MEDIUM.         199 

there  IS  an  advantage  in  eiiijiloying  tub  metals  for  this 
purpose.  For  this  reason,  boih  silver  and  gold  are  com- 
monly employed  in  n)ost  civilized  countries.  For  ex- 
changes of  less  value  than  the  smallest  silver  coin,  co})j)er 
is  also  generally  used.  And,  if  silver  should'ever  be- 
come so  abundant  and  cheap  as  to  be  too  bulky  to  be 
used  for  effecting  small  exchanges,  it  would  take  the 
place  of  copper,  and  its  place  would  be  supplied  by 
gold.  Should  gold  become  as  abundant  as  silver,  it 
would  take  the  place  of  silver  and  some  dearer  metal,  as 
platina  would  be  used  in  its  stead. 

Inasmuch  as  gold  and  silver  possess  all  the  essential 
qualities  which  are  required  in  a  circulating  medium  ; 
and  as  the  condition  of  man  so  manifestly  points  to  the 
necessity  of  some  such  instrument,  it  is  not  remarkable 
that  they  have  so  long  and  so  universally  been  adopted 
for  this  purpose.  But  it  is  always  to  be  remembered, 
that  we  use  them  as  a  circulating  medium,  because  ice 
leant  a  circulating  medium,  and  because  they  accomplish 
the  purpose.  We  do  not  use  them  as  a  circulating  me- 
dium, because  we  see  a  stamp  upon  them.,  nor  because 
government  has  made  them  a  legal  tender  ;  but  because 
we  know  that  they  represent  a  given  amount  of  value^ 
and  we  therefore  know,  that  we  can  exchange  them  for 
the  same  amount  of  value,  whenever  we  |)lease.  If  a 
bushel  of  wheat  sell  for  a  dollar,  we  know  that  it  costs 
as  much  labor  to  produce  a  dollar  at  the  mine  and  bring 
it  to  us,  as  to  produce  a  bushel  of  wheat  and  bring  it  to 
us.  Hence,  we  know  that,  until  some  new  and  vastly 
more  productive  mines  are  discovered,  this  dollar  cannot 
be  produced  for  less  labor,  nor  represent  a  less  amount 
of  value.  And,  as  every  body  wants  a  dollar,  and  no 
one  can  furmsh  it  at  a  less  cost,  we  know  that  it  \viil 
bring,  in  exchange,  the  same  as  we  have  given  for  it. 

We  remarked,  when  speaking  of  exchangeable  value, 
that  the  demand  for  any  product,  and,  of  course,  its 
exchangeable  value,  was  affected  by  the  number  of  de- 
sires it  would  gratify.  The  greater  the  number  of  de- 
sires which  it  will  gratify,  the  greater  the  number  of 
persons  who  will  want  it ;  hence,  they  will  overbid  each 


200        OF  THE  rUNCTIONS  OF  MONEY. 

Other  ;  and,  unless  there  be  some  improved,  that  is, 
cheaper  method  of  producing  it,  its  exchar)geable  value 
will  rise.  This  principle  applies  to  whatever  is  used  as 
money.  The  precious  metals  are  used  for  ornament,  for 
domestic  utensils,  and  for  coin.  If  the  use  of  them  fo'' 
one  of  these  purposes  should  be  discontinued,  the  de- 
mand would  be  less  ;  and,  as  they  are  not  liable  to  de- 
cay, their  relative  price  would  fall. 

Hence  it  is,  that  the  amount  of  plate  and  utensils 
formed  of  the  precious  metals,  in  a  country,  is  no  crite- 
rion of  its  wealth,  but  frequently  an  indication  of  the 
reverse.  Should  conmierce  be  unproductive,  and  ex- 
changes diminish,  and  our  intercourse  with  other  nations 
be  cut  off,  and  we  be  reduced  to  the  condition  of  Europe 
m  the  dark  ages,  there  would  be  but  little  need  of  the 
precious  metals  as  an  instrument  of  exchange,  and  their 
price  would  fall.  Hence  they  would  be  melted  down  by 
the  rich,  into  plate.  And,  on  the  other  hand,  when  they 
have  been  used  for  plate,  and  the  demand  for  them,  and 
their  consequent  price,  have  from  any  cause  subsequently 
increased,  the  temptation  to  use  them  productively,  is 
too  great  to  allow  them  to  be  employed  in  this  manner  ; 
and  the  plate  is  melted  into  coin,  and  its  place  supplied 
with  porcelain,  or  plated  ware,  or  glass,  or  any  ether 
material  of  equal  beauty,  but  of  inferior  costliness. 


SECTION  III. 

OF    THE    FUNCTIONS     OF    MONEY. 

Let  us  now  suppose  metals  to  have  been  selected  l:y 
the  whole  community  as  the  circulating  medium,  and  that 
ihey  have  been  so  divided  and  verified  as  to  be  fitted  to 
accomplish  this  purpose.  We  shall  proceed  to  consider 
some  of  the  functions  which  these  metals  would  discharge. 

Money   is   the    instrument    for  facilitating  oxchan^es 
This,  when  considered  as  money,  is  its  only  oflicc.     By 


OF    THE    FUNCTIOxXS    OF    MONET.  201 

acccmplisliing  this  purpose  in  the  least  time,  and  at  the 
least  expense  of  labor,  and  transportation,  and  wear,  it 
reduces  the  cost  of  every  product,  and  thus  adds  im- 
mensely to  the  productiveness  of  human  industry. 

The  princi|)les  on  which  it  accomplishes  this  result, 
have  been  already  alluded  to.  They  are  brieHy  as  fol- 
lows . 

1.  The  cost  or  price  of  the  money  employed  in  every 
exchange,  is  equal  to  the  cost  or  price  of  the  article 
which  is  exchanged  for  it.  If  a  barrel  of  flour  in  Lima 
be  exchanged  for  ten  ounces  of  silver,  the  cost  of  pro- 
ducing the  flour,  and  of  transporting  it  to  Lima,  is  equal 
10  the  cost  of  producing  the  silver  and  transporting  it  to 
the  same  place.  If  a  barrel  of  flour  in  New  York,  be 
exchanged  for  seven  ounces  of  silver,  the  cost  and 
transportation  of  the  one  at  the  place  of  exchange,  is 
equal  to  that  of  the  other.  If  the  flour  merchant  wishes 
for  a  thousand  ounces  of  silver,  he  can  procure  it  more 
cheaply  by  producing  flour  than  he  can  by  going  to  tiie 
mines  of  Mexico,  and  working  it  out  from  the  oie. 
And,  if  the  miner  wishes  for  flour,  he  can  prociue  it 
more  cheaply  by  working  in  the  mine,  than  by  attempt- 
ing to  raise  wheat  and  manufacture  flour  on  the  moun- 
tains of  Potosi. 

That  this  is  so,  is  evident  from  the  fact,  that  if  the 
cost  of  the  precious  metals  change,  their  exchangeable 
value  varies,  like  that  of  any  other  product.  Thus,  if 
new  and  richer  mines  are  opened,  so  that  the  cost  of 
producing  the  precious  metals  is  reduced,  or,  in  other 
words,  so  that  mining  labor  is  more  productive,  the  price 
of  the  precious  metals  falls.  In  such  a  case,  we  receive 
more  silver  for  a  day's  work,  for  a  bushel  of  wheat,  for 
a  pound  of  wool,  or  for  any  other  product.  Money  is 
thus  rendered  cheaper,  on  the  same  principle  that  when 
a  wheat  harvest  is  abundant,  we  receive  a  larger  amount 
of  wheat  for  a  day's  work,  or  for  a  pound  of  wool,  than 
at  other  tinjes.  This  is  exemplified,  in  the  great  change 
of  prices  which  occurred  tiiroughout  the  world  after  the 
discovery  of  the  mines  of  South  America.  And,  on 
the  other  hand,  when  the  price  of  producing  the  precious 


202  OF    THE    FUNCTIONS    OF    MONEY. 

metals  is  increased,  their  exchangeable  value  rises.  Tliis 
has  been  the  case,  for  some  time  past,  in  consequence 
of  the  civil  wars  of  South  America.  Hence,  there  ha? 
been  for  some  time  past,  a  gradual  rise  in  the  price  of 
the  precious  metals  ;  that  is,  the  price  of  other  things 
has  fallen  ;  or,  in  general,  if  the  cost  of  the  production 
of  the  precious  metals  diminishes,  while  that  of  the  pro- 
duction of  wheat  remains  the  same,  we  shall  receive 
more  silver  in  exchange  for  a  bushel  of  wheat.  ]f  the 
cost  of  producing  an  ounce  of  silver  is  increased  while 
that  of  producing  a  bushel  of  wheat  remains  the  same, 
we  shall  receive  less  silver,  in  exchange  for  a  bushel  of 
wheat.  That  is,  in  exchanging  products  for  the  precious 
metals,  as  for  any  thing  else,  we  exchange  on  the  prin- 
ciple of  labor  for  labor. 

Besides,  the  price  of  the  precious  metals,  like  that  of 
any  other  commodity,  is  influenced,  in  short  periods,  by 
the  fluctuations  of  supply  and  demand.  There  is,  in 
any  country,  the  course  of  whose  industry  is  not  distort- 
ed by  legislation,  a  supply  of  money,  equal  to  the  ordi- 
nary wants  of  the  community,  for  the  purposes  of  ex- 
change. The  price  of  both  articles,  is,  in  such  a  case, 
based  upon  the  cost  of  the  production  of  specie,  com- 
pared with  the  cost  of  the  production  of  the  several  ar- 
ticles for  which  it  is  exchanged.  But,  suppose  that 
while  this  amount  of  specie  remains  the  same,  there 
should  happen  a  year  of  universal  productiveness  in  all 
the  departments  of  agricultural,  manufacturing,  and  com- 
mercial industry.  In  this  case,  the  number  of  exchang- 
es, and  the  amounts  exchanged,  would  be  proportionall)- 
mcreased.  The  instrtmient  with  which  exchanges  were 
to  be  made,  would  be  relatively  scarce  ;  the  demand  for 
It  would  ris(^  ;  and  there  would  be  comi)etition  among 
the  bidders  for  it.  Hence,  its  exchangeable  value  would 
rise  ;  that  is,  we  should  give  more  wool,  and  wheat,  and 
cotton,  for  an  ounce  of  silver  ;  every  thing  would  be 
cheap  ;  or,  in  other  words,  for  an  ounce  of  silver,  we 
should  ))rocure  a  larger  amount  of  other  products;  as 
we  always  do,  in  a  season  of  universal  productiveness. 
And,  on  the  contrary,  if,  while  the  ordinary  amount  of 


OF    THE    FUNCTIONS    OF    MONEY.  203 

specie  remained  in  tl.e  country,  there  occnrrcd  a  very 
unproductive  season,  llie  number  of  exchanges  would 
proportionally  diminish,  and  there  would  be  less  demand 
tor  the  instrument  of  exchange.  There  would  arise  a 
competition  among  the  sellers,  and  the  relative  price  of 
money  would  fall  ;  we  should  give  more  money  for 
e\ery  other  article  of  necessity  ;  that  is,  every  thing 
would  be  dear,  as  every  one  knows  it  is,  in  a  seasoi: 
of  scarcity. 

We  see,  then,  that  the  exchangeable  value  of  mono), 
is  not  derived  from  its  shape  or  color,  from  the  stamp 
of  the  mint,  or  from  the  enactments  of  the  government ; 
but  that,  like  every  thing  else,  it  is  based  upon  the  cost 
of  its  jiroduction,  varying,  slightly,  and  for  short  periods, 
like  every  thing  else,  with  the  accidental  fluctuations  of 
'supply  and  demand.  And  hence,  the  reason  why  a  man 
exchanges  a  bushel  of  wheat  for  two  ounces  of  silver, 
and  a  yard  of  broadcloth  for  six  ounces,  is,  that  it  costs 
as  much  labor  and  capital  to  produce  the  one  at  the 
place  of  exchange,  as  the  other,  and  that  no  one  can 
produce  the  given  amount  of  silver,  by  mining,  or  in 
any  other  way,  without  expending  the  same  anjount  of 
labor  and  capital,  that  the  flour  merchant  or  the  manu- 
facturer has  expended  in  the  creation  of  his  products. 

As,  then,  every  man,  when  he  exchanges  his  products 
for  the  precious  metals,  knows  that  he  receives  a  com- 
modity of  as  much  cost  ;  that  is,  which  represents  the 
same  amount  of  labor  and  capital,  as  that  for  which  he 
exchanges  it ;  and,  as  he  knows  that  every  one  wants 
this  commodity,  that  is,  he  can  procme  with  it  any  thing 
which  any  one  else  has  to  exchange  ;  and,  as  no  one 
who  wants  it,  can  procure  it  on  any  better  terms  from 
any  one  else  than  from  himself,  every  one  is  willing  to 
exchange  for  n)oney,  and  would  rather  exchange  for  it 
than  for  any  thing  else.  As  this  feeling  is  universal, 
every  one  acts  upon  the  sanie  principle  ;  and  hence,  all 
exchanges  are  either  made  in  money,  or  else  are  regu- 
lated by  it. 

II.  But  the  question  will  naturally  arise,  if  the  value 
of  the  silver  be  equal  to  that  of  all  the  amo  Juts  exciiang- 


204        OF  TUB  FUNCTIONS  OF  MONEY. 

ed  for  it,  must  not  the  value  of  the  precious  metals  in 
the  coiiimuniiy,  be  equal  to  the  value  of  all  the  other 
commodities  ? 

We  answer,  this  would  be  the  case,  if  all  exchanges 
were  actually  made  in  money,  and  actually  made  at  the 
same  instant.      But  the  contrary  is  the  fact. 

No  man  exchanges  all  his  products  at  once,  but  ex- 
changes them  in  successive  portions.  If  two  men  pos- 
sess one  thousand  dollars'  worth  of  commodities  ;  for 
instance,  if  A  and  B  live  in  difierent  towns,  and  if  A 
have  wool  and  B  have  wheat,  and  they  exchange  the 
whole  at  once,  and  use  money  as  the  instrument,  they 
must  each  possess  also  one  thousand  dollars  with  which 
to  make  the  exchange  ;  that  is,  A  must  give  B  one 
thousand  dollars  for  his  wool,  and  vice  versa.  But,  if 
they  exchange  in  portions  of  tiie  value  of  ten  dollars,  at 
one  hundred  successive  limes,  ten  dollars  in  the  posses- 
sion of  each,  and  the  same  identical  ten  dollars,  would 
accomplish  the  whole  object.  Now,  as  it  is  evident,  that 
on  any  particular  day,  only  a  very  small  part  of  the 
whole  amount  of  values  in  the  possession  of  tlie  commu- 
nity, is  exchanged,  it  is  evident  that  only  so  much  of  the 
instrument  of  exchange  is  necessary,  as  will  accomplish 
the  exchanges  which  the  convenience  of  the  conmiunity 
requires.  No  one  supposes,  because  there  is  ^a  million 
tons  of  merchandise  in  a  city,  that  there  must  have  been 
vehicles  capable  of  carrying  a  million  tons  at  once  in  or- 
der to  bring  it  there.  A  locomotive,  carrying  fifty  tons 
at  once,  if  it  went  and  returned  fiequcntly,  would  speed- 
ily accomplish  the  whole  work. 

2.  But  this  is  not  all.  A  large  amount  of  exchanges 
is  constantly  made  in  kind.  A  buys  wool  of  B,  and  B 
bfiys  cloth  of  A.  They  both  estimate  the  value  of 
their  product  in  money,  because,  as  this  is  the  usual 
medium  of  exchange,  and  that  by  which  they  are  oblig- 
ed to  estimate  cost,  this  method  of  estimation  is  most 
convenient.  Each  charges  the  other  with  all  that  he 
purchases,  at  its  value  in  silver.  At  the  close  of  the 
year,  they  adjust  their  accounts  with  each  other.  If  A 
and  B  have;  both  received  of  each  other  the  same  amount 


OF    THE    FUNCTIONS    OF    MONET.  205 

of  value  estimated  in  silver,  the  one  account  balances 
the  other  ;  and  thus,  no  nioney  at  all  is  required.  If 
one  have  received  more  than  the  other,  he  pays  merely 
the  dilierence,  either  in  silver,  or  else  in  his  own  prod- 
uct, at  the  option  of  his  creditor.  In  this  manner,  a 
large  proportion  of  the  exchanges  actually  made,  is  con- 
ducted. In  this  manner,  book-keeping  tends  greatly  to 
diminish  the  amount  of  the  circulating  medium  necessa 
ry  for  the  exchanges  of  a  community. 

3.  We  see  that  this  is  still  more  emphatically  the 
case,  in  respect  to  all  the  exchanges  which  take  place 
between  diderent  districts,  and  difierent  nations.  Inas- 
much as  no  society  can  gain  possession  of  the  objects  of 
desire,  except  by  its  own  labor,  it  must  pay  for  what  it 
receives  in  the  product  of  the  labor  of  others,  with  what 
it  sends  away,  in  the  product  of  its  own  labor  ;  that  is 
to  say,  the  exports  of  any  country  must  be  substantially 
equal  to  its  imports.  If,  then,  the  transactions  between 
two  nations  should  be  precisely  equal,  there  would  be  no 
need  of  the  transmission  of  any  money  at  all  between 
them.  If  A  send  ten  thousand  dollars'  worth  of  cotton 
to  Liverpool,  and  import  ten  thousand  dollars'  worth  ot 
calicos  from  Manchester  ;  he  authorizes  the  manufac- 
turer in  Manchester  to  receive  in  payment,  the  ten  thou- 
sand dollars  which  are  due  to  him  from  the  merchant  in 
Liverpool  ;  and,  thus,  the  whole  matter  is  adjusted.  If 
we  receive  from  England,  values  to  a  larger  amount  than 
she  wishes  to  receive  in  our  own  productions,  we  send 
some  of  our  productions  to  a  third  country,  and  thus  pro- 
cure for  England,  what  she  wishes  from  the  third  coun- 
try, in  sufficient  quantity  to  pay  the  residue.  If  we  can 
get  her  products,  in  this  manner,  cheaper  than  we  can 
make  them  ourselves,  it  is  for  our  interest  to  do  so.  If 
they  thus  come  to  us  at  a  cost  greater  than  that  for  which 
we  could  produce  them  ourselves,  we  shall  relinquish  the 
trade,  and  begin  to  manufacture  them.  In  either  case, 
there  is  no  necessity  for  the  use  of  money.  And  hence, 
in  general,  the  only  reason  why  money  is  ser.t  from  one 
country  to  another,  in  the  transactions  of  commerce,  is 
the  same  reason  as  that  for  which  tea,  or  coflee,  or 
IS 


206        OF  THE  FUNCTIONS  OF  MONEY 

cotton,  or  flour,  is  sent ;  that  is,  because  it  is  so  niucli 
cheaper  in  the  country  from  which  it  is  sent,  than  in 
that  to  which  it  is  exported,  that  a  larger  value  can  be 
procured  for  it,  than  for  the  same  value  of  any  othei 
commodity.  In  this  case,  it  is  for  the  advantage  of  both 
countries  that  it  should  be  so  exchanged. 

The  amount  of  the  circulating  medium,  in  any  one 
country,  and,  of  course,  in  all  countries,  must,  therefore, 
be  very  small,  in  proportion  to  the  whole  amount  of  the 
capital  of  a  country.  The  actual  j)roporiion,  perhaps, 
cannot  be  estimated  with  accuracy.  In  Great  Britain, 
writers  on  this  subject  have  gi'eatly  varied.  Some  have 
estimated  it  at  the  50th,  and  others,  at  the  127ih  pan 
of  the  whole  capital.  The  latter  is,  probably,  by  far 
the  nearer  to  the  truth. 

III.  We  see,  then,  that,  under  given  circumstances, 
in  any  country,  a  given  amount  of  specie  will  be  lequir- 
ed  to  effect  its  exchanges  ;  and  that,  that  amount  will 
depend  upon  the  relative  value  of  the  precious  metals 
with  other  things,  and  upon  the  number  and  the  facili- 
ties of  exchange.  These  latter  circumstances  remain- 
ing the  same,  the  same  value  in  specie  will  always  be 
required,  and  no  more.  If  specie,  equal  in  value  to  ten 
million  bushels  of  wheat  be  required,  no  more  in  value 
can  be  used.  If  the  amount  be  increased,  its  value 
will  fall.  If  the  amount  be  diminished,  its  value  will 
rise.  And  this  rise  and  fall  will  equally  take  })lace, 
whether  the  relative  variation  arise  from  a  change  in  the 
cost  of  specie  or  of  other  products.  Now,  it  is  easy  to 
see  that  these  variations^  if  left  alone^  loill  regulate 
themselves. 

We  have  seen,  already,  that  the  relative  value  of 
specie  and  of  other  products  may  vary.  Let  us  sup- 
pose, in  the  first  instance,  that  production,  in  any  one 
year,  is  greatly  increased,  so  that  money  in  any  country 
is  dear,  or,  which  is  the  same  thing,  that  other  products 
are  cheap.  Let  us,  for  the  sake  of  ilKistraiion,  suppose, 
that  in  New  \\)rk,  fl'our  is  sold  at  four  dollars  \)vr  barrel 
If,  now,  a  merchant  wished  to  iniport  a  cargo  of  wine 
from  Bordeaux,  since  four  dollars  and  a  barrel  of  floui 


OF    THE     FUNCTIONS    OF    MONEY.  207 

here,  are  at  the  same  price,  he  can  as  cheaply  send  out 
the  one  as  tlie  other,  wiih  which  to  pay  lor  his  wine. 
But  suppose  that  a  barrel  of  Hour  will  purchase  more 
wine  in  Bordeaux,  than  four  dollars  or  lour  ounces  of 
silver.  He  will  then  send  flour,  instead  of  silver  ;  and, 
as  all  other  men  in  their  senses  will  do  the  same,  of 
course  no  specie  will  leave  the  country.  On  the  contra- 
ry, a  merchant  in  London,  wishing  to  purchase  cotton  in 
New  York,  will  ascertain  the  relative  value  of  specie, 
and  that  of  calico,  or  hardware,  or  iron  ;  and  will  send 
specie  in  payment  for  his  cotton,  whenever  he  finds  that, 
by  a  given  value  of  this  export,  he  can  import  a  greater 
amount  of  cotton,  than  by  the  same  value  of  any  other. 
Other  merciiants  in  other  places  will  do  the  same,  until 
the  requisite  amount  of  specie  has  flowed  in,  and  it  has 
become  as  abundant  here,  as  in  other  countries.  Thus, 
v\hen  specie  is  high  in  any  country,  it  goes  out  nowhere, 
and  comes  in  from  everywhere. 

On  the  contrary  :  suppose  an  unproductive  season  to 
arise,  and  the  relative  quantity  of  specie  in  this  country, 
to  exceed  the  average  in  other  countries.  In  this  coun- 
try, therefore,  specie  would  be  cheap  ;  that  is,  every 
thing  else  would  be  dear.  The  merchant,  who  wished 
to  inq)ort  a  cargo  of  iron,  would  compare  the  prices  of 
flour  and  of  money.  If  flour  was  at  fifteen  dollars  the 
barrel,  that  is,  if  he  could  })in-chase,  at  tlie  same  price, 
a  barrel  of  flour  and  fifteen  dollais,  he  would  easily  as- 
certain by  which,  in  Eussia,  he  could  ])rocure  the  great- 
est amount  of  iron.  If  fifteen  tlollars  would  procure  the 
most  iron,  he  would  send  the  dollars  instead  of  the  flour. 
'J'his  would  be  an  advantage  to  him  and  to  the  country, 
because,  by  this  mode  of-  exchange,  he  receives  tlie 
largest  amount  in  return  ;  and  he  procures  it  by  means 
of  that  which  is  relatively  the  most  abundant  ;  that  is, 
which  is  manifestly  the  least  needed.  Anc|,a  merchant 
in  Liverpool,  who  knows  the  prices  of  our  products, 
observing  that  he  can  exchange  more  profitably  with  us 
by  receiving  his  payment  in  specie,  at  the  relative  prices 
which  specie  and  products  sustain  to  each  other,  will  re- 
ceive  his  payments   in  specie.     Thus,   by  the  sending 


208  OF    THE    FUxNCTIONS    OF    MONET. 

abroad  of  our  specie,  which  we  do  not  so  much  need, 
we  shall  be  supplied  with  other  products  which  we  mora 
need  ;  and  hence,  the  relative  value  of  specie  to  other 
products,  will  be  again  brought  to  an  equilibrium.  In 
other  words,  when  specie  is  cheap  in  any  country,  ii 
comes  in  from  nowhere,  and  goes  out  everywhere. 
Thus,  among  countries  between  which  there  is  frequent 
intercourse,  and  a  free  circulation  of  mercantile  infor- 
mation, the  price  of  the  precious  metals  can  never,  for 
long  periods,  vary  much  from  the  medium  rate,  or, 
the  rate  which  is  fixed  by  nature,  in  the  cost  of  their 
production.  Hence  we  see,  that  a  provision  is  made, 
founded  on  the  self-interest  of  man,  by  which  any  great 
fluctuation  in  the  exchangeable  value  of  the  metals  used 
as  a  circulating  medium,  is  prevented.*  It  is  evident 
that  the  same  consequences  must  ensue,  from  what  cause 
soever  the  rise  of  prices  may  have  taken  place.  Sup- 
pose that  instead  of  a  diminution  of  productions,  there 
should  occur  an  increase  of  the  circulating  medium,  as,, 
for  instance,  by  very  large  issues  of  bank  paper.  The 
proportion  between  the  circulating  medium  and  the  prod- 
ucts to  be  exchanged  would  be  disturbed.  Money  would 
be  plenty,  and  prices  would  rise.  They  might  easily  rise 
so  high  that  products  could  not  be  exported  as  well  as 
money.  Specie  would  then  be  exported,  and  the  bank 
notes  would  be  recalled.  Thus  large  issues  and  high 
prices.,  create,  of  necessity,  mercantile  distress  and  slag- 
nation  of  business. 

IV.  Hence,  we  also  see  what  is  a  real  scarcity.,  and 
ichat  an  abundance  of  money  ;  if,  by  the  term  money, 
we  understand  merely  a  metallic  circulating  medium 

*  Willie,  howpver,  this  is  the  natural  cause  for  the  exportation  of 
Bpecie,  other  causes,  which  may  he  termed  accidental,  frequently  oc- 
cur. Where  one  country  is  larirely  indehled  to  another  country,  and 
its  payuienls  frll  due  at  atiuie  when  the  supply  of  its  own  products  is 
insufficient  to  meet  its  ind''btet!ness,  or  when  the  fiireijrn  market  ia 
glutted  with  those  products;  sj)ecially  if  there  be  any  doubt  of  its 
ultimate  solvency  ;  then,  in  order  to  meet  its  engiiirements  in  lime,  it 
is  fnniuently  obli^red  to  transmit  to  its  creditor  specie  funds  to  make 
up  tin-  (leficitMicy.  Tliis  i.s  one  of  the  results  of  the  abuse  of  credit, 
and  is  always  attended  witu  irreat  financial  cmbarrassineut. 


OF    THE     FUNCTIONS    OF    MONEY.  209 

Money,  we  liave  said,  is  the  instrument  by  wliicli  we 
I'acilitate  exchanges.  Now,  if  we  bear  this  in  mind,  it 
is  easy  to  see  what  is  a  plenty  and  what  a  scarcity  of 
this  instrument.  A  power  loom  is  an  instrument  for  fa- 
cilitating the  operation  of  transforming  yarn  into  cloth 
Power  looms  are  too  plentiful,  when  there  are  too  many 
to  perform  the  work  that  is  recjuired  to  be  done  ;  in  this 
case,  we  can  buy  them  cheap  ;  that  is,  we  have  to  giv^ 
for  them  a  less  amount  of  cotton  cloth,  or  of  wool,  or 
of  silver.  Power  looms  are  scarce,  when  there  are  not 
enough  of  them  to  perform  the  operations  which  are  re- 
quired ;  in  this  case,  we  find  it  difncult  to  purchase 
ihem ;  they  are  dear  ;  that  is,  we  are  obliged  to  give  for 
them  more  than  the  ordinary  amount  of  cotton,  or  of 
wool,  or  of  silver.  The  case  is  the  same  with  vehicles 
for  transportation,  or  with  any  other  instruments. 

Now  money  is  just  such  an  instrument.  It  is  requir- 
ed, to  facilitate  exchanges.  To  accomplish  a  given 
amount  of  exchange,  a  certain  value  in  money  is  requir- 
ed, and,  in  ordinary  times,  this  value  always  exists. 
And,  the  exchanges  remaining  the  same,  we  cannot  em- 
ploy for  this  purpose  more  than  this  amount  of  value. 
[f  a  quantity  etpial  to  one  thousand  ounces  of  silver,  or 
of  one  thousand  bushels  of  wheat,  be  required  to  per- 
form the  exchanges  of  a  certain  community,  we  cannot 
emj)loy  more  than  this  amount  of  value.  If  we  increase 
the  quantity,  we  shall  only  decrease  the  value  propor- 
tionally. If  such  a  country  be  insulated  from  other 
countries,  and  we  introduce  into  its  circulation  one  thou- 
sand additional  ounces  of  silver,  equal  to  one  thousand 
additional  bushels  of  wheat,  the  value  of  the  whole  two 
thousand  will  be  just  equal  to  that  of  the  one  thousand 
ounces  before  ;  that  is,  the  value  will  not  alter.  U^  on 
the  other  hand,  from  such  a  country  thus  insulated,  we 
remove  half  the  circulating  medium,  the  remaining  half 
will  accomplish  the  purpose  of  the  whole  ;  that  is,  it 
will  double  in  value.  Tl)is  is  evident,  because  there  are 
neither  more  nor  less  exchanges  to  be  made  than  before, 
and  a  rariation  in  the  instrument  does  not  vary  the 
amount  of  the  work  which  the  necessities  of  the  com- 
18* 


210  OF    THE    FUNCTIONS    OF    MONET. 

munity  require  to  be  done.  If  there  be  a  given  amount 
of  yarn  to  be  woven  by  twenty  looms,  the  quantity  will 
not  be  increased,  by  employing  forty  looms.  And,  if 
we  employ  forty,  we  must  work  all  of  them  but  half  the 
time  ;  that  is,  each  one  will  be  of  half  its  original  value. 
If  the  work  be  doubled,  we  must  work  them  by  day  and 
by  night;  that  is,  each  one  will  be  worth  twice  as  much 
as  before.  But,  manifestly,  the  quantity  of  work  to  be 
done  being  given,  it  can  never  be  affected  by  varying 
the  quantity  of  the  instruments  by  which  it  is  accom- 
plished. 

Now,  suppose  the  exchanges,  in  a  given  connnunity, 
be  equal  to  fifty  millions  annually,  and  that  there  are  re- 
quired, to  effect  these  exchanges,  one  million  ounces  of 
silver,  and  that  this  quantity  of  silver  actually  exists  in 
its  possession.  Under  these  circumstances,  there  will 
•  be  neither  a  plenty  nor  a  scarcity  of  money,  and  it  will 
be  neither  exported  nor  imported.  But  suppose,  that, 
owing  to  a  very  productive  harvest,  or  some  rapid  im- 
provement in  the  productiveness  of  human  labor,  the 
amount  of  products  to  be  exchanged  arises  to  seventy- 
five  miUions.  Here  will  arise  a  scarcity  of  money ; 
there  will  be  more  exchanges  than  can  be  accomplished 
by  the  instrument  employed  for  eficcting  them.  The 
price  of  money  will  rise  ;  in  other  words,  the  price  of 
other  commodities  will  fall,  and  every  thing  will  be 
cheap  ;  that  is,  though  you  cannot  purchase  more  wool, 
or  butcher's  meat,  or  cotton,  with  a  barrel  of  flour,  than 
you  could  last  year,  you  can  purchase  more  wool,  or 
meat,  or  cotton,  with  the  money  which  a  barrel  of  flour 
cost  last  year.  The  same  result  will  take  place,  if,  while 
production  continues  as  active,  one  half  of  the  sjiecie 
for  any  purpose,  as  the  cairying  on  of  a  foreign  war, 
weie  sent  out  of  the  country.  In  this  case,  as  in  the 
other,  the  price  of  money  will  rise  ;  that  is,  money  will 
be  dear,  and  every  thing  else  will  be  cheap. 

But  it  is  easy  to  see,  on  the  principles  already  ex- 
plained, in  what  manner  this  difllculty  will  be  met.  In 
the  first  place,  irasmuch  as  money  prices  are  lower  than 
any  others  ;  that  is,  as  specie  retains  its  former  value  in 


OF    THE     FUNCTIONS     OF    MONEIT.  211 

all  other  places,  but  here,  it  is  dearer ;  that  is,  will  pur- 
ciiase  more  than  any  other  coinniodity  ;  other  nations 
will  send  specie  in  exchange.  This  will  be  done,  until 
the  equilibrium  is  restored.  And  thus,  this  one  nation 
shares  the  blessing  of  God's  providence  with  its  neigh- 
bors, since  they  receive  its  productions  at  a  less  price. 
In  the  second  place,  something  else,  as,  for  instance, 
notes  of  hand,  will  be,  in  part,  substituted  for  specie  ; 
that  is  to  say,  as  there  is  too  much  exchanging  to  be 
done  in  a  given  time  by  the  instrument,  at  its  utmost 
power  of  working,  the  work  is  spread  over  a  longer 
time,  and,  instead  of  exchanging  for  specie  now,  the 
parties  agree  to  exchange,  but  defer  the  payment  for 
three  or  six  months.  Thus,  when  a  weaver  is  unable  to 
perform  the  work  of  his  customers  to-day,  he  promises 
to  do  it  at  a  subsequent  time  ;  and,  in  the  mean  while, 
if  his  present  instrument  will  not  accomplish  it,  he  pro 
cures  others  tiiat  will.  So,  the  merchant  spreads  the 
exchange  uf  to-day  over  a  larger  time,  and,  in  this 
lime,  is  able  to  secure  the  instrument  to  accomplish  the 
object. 

And  thus  we  see,  what  is  also  an  unusual  plentiful- 
.nessof  money.  If,  while  exchanges  were  at  fifty  mil- 
lions, and  one  million  ounces  of  silver  were  necessary  to 
effect  them,  a  mine  were  discovered,  by  which  the  quan- 
tity in  circulation  was  doubled,  the  price  of  silver  would 
fall,  and  we  should  give  twice  the.  usual  price  for  com- 
modities. Or,  if  while  the  silver  remained  the  same, 
production,  and,  of  course,  exchange,  diminished  one 
half,  the  result  would  be  the  same.  In  this  case,  as  we 
have  already  seen,  specie  would  be  sent  in  exchange  to 
other  countries,  because  it  was  less  needed,  and  its  place 
would  be  su()plied  by  other  productions  which  wore 
more-needed. 

Hence  we  see,  that  a  plentifulness  or  a  scarcity  of 
money  forms  no  occasion  which  calls  for  the  interference 
of  government,  but  that  it  is  a  matter,  which,  if  left 
aloiie,  will  regulate  itself.  When  money  is  really 
scarce,  there  is  no  need  of  prohibiting  its  exportation  ; 
for  no  one  will  be  so  unwise  as  to  export  it.      When  it 


212  OF    THE    FUNCTIONS    OF    MONEY. 

/s  abundant,  it  is  useless  to  prohibit  its  exportation,  be- 
cause It  cannot  be  prevented  ;  and  because,  if  it  could 
be  prevented,  by  preventing  it,  we  should  doprive  our- 
selves of  the  only  method  in  our  jjower  of  alleviating  the 
evils  whiv^h  we  sutler.  The  precious  metals  are  rela- 
tively abundant  in  the  states  of  South  America  ;  that  is, 
they  need  other  kinds  of  capital  more  than  they  need 
this.  How  absurd  a  policy  would  it  be,  to  forbid  the 
exportation  of  those  metals,  and  thus  deprive  themselves 
of  all  the  ctnveniences  of  other  countries,  nay,  of  the  very 
means  on  which  progress  in  civilization  and  the  arts,  and 
in  the  real  accumulation  of  wealih,  depends. 

Hence  the  notion,  that  the  plentifulness  or  scarcity  of 
money  is  an  unfailing  indication  of  the  prosperity  or  of 
the  adversity  of  a  country,  is,  in  the  highest  degree,  fal- 
lacious. If  the  scarcity  result  from  an  increased  pro- 
ductiveness of  labor,  it  is  an  indication  of  prosperity  ; 
just  as  the  business  of  weaving  is  most  prosperous,  when 
the  weavers  have  more  work  than  they  can  do.  If  it 
result  from  a  casual  withdrawment  of  specie,  it  is  an  am- 
biguous indication,  and  its  effect  upon  the  country  will 
depend  upon  the  use  which  is  made  of  that  which  is  sent 
abroad.  If  it  be  employed  in  wars,  or  in  other  unpro-. 
ductive  consumption,  it  is  just  so  much  loss  ;  and  it 
matters  not  whether  this  amount  of  loss  be  in  silver,  or 
gold,  or  copper,  or  tea,  or  coflee,  or  cotton.  If  it  be 
well  invested,  and  return  in  the  form  of  a  profitable  ad- 
dition to  the  capital  of  the  country,  it  is  just  as  much  a 
source  of  gain,  as  thougli  the  same  profit  were  made  up- 
on any  other  article.  It  is  profitable  for  an  individual  to 
give  one  thousand  dolhu's  for  what  is  worth  fifteen  hun 
dred  dollars,  although,  for  a  month  afterwards,  he  be 
obliged  to  live  somewhat  more  economically.  And 
what  is  profitable  for  the  individual,  is  profitable  for  the 
country. 

And  so  of  the  plentifulness  of  money.  If  a  mine 
were  discovered,  by  which  the  quantity  of  silver  were 
doubled,  and  if  this  silver  were  produced  at  a  fair  profit 
to  the  miner,  it  would  be  an  advantage,  inasmuch  as  it 
would  open  a  new  and  profitable  method  of  employing 


OF  THE  FUNCTIONS  OF  MONEV.        213 

both  capital  and  labor.  But,  in  tliis  case,  it  could  be  of 
use  only  by  iis  exportation,  because,  as  the  number  of 
exchanges  in  the  country  has  not  been  increased,  only 
die  former  amount  of  value  is  needed  for  a  circulating; 
meditun,  and  to  increase  the  quantity,  will  be  only  to 
diminish  the  value.  By  being  sent  abroad,  caj)ital,  in 
other  forms,  susceptible  of  change  and  increase  of  val- 
ue, is  imported  ;  and  thus,  a  country  is  made  richer. 
If  the  plentifulness  be  the  result  of  the  diminution  of 
exchanges,  it  is  an  indication  of  adversity,  because  il 
shows  that  productiveness  has  fallen  of]',  that  the  means 
of  living  are  less  abundant,  and  that  capital  is  in  haste  to 
flee  to  more  congenial  climes.  When  this  is  the  case, 
it  generally  springs  from  oppressive  legislation.  In  this 
case,  it  is  belter  for  a  government  to  remove  the  cause, 
than  to  aggravate  the  evil  by  additional  and  aggravated 
wrong.  To  prohibit  the  exportation  of  specie,  in  such 
a  case,  is  not  only  to  oppress  a  human  being,  but  to  for- 
bid him  the  use  of  any  means  by  which  he  shall  escape 
from  your  oppression. 

Thus  it  follows,  that  no  indication  of  the  prosperity 
of  a  country  can  be  derived,  either  from  the  plentiful- 
ness or  from  the  scarcity  of  money.  The  only  sure  in- 
dication of  its  economical  prospeiity,  is  the  increase  of 
its  productiveness  ;  that  is,  an  increase  of  the  supply  of 
objects  of  desire  at  the  same,  or  at  a  diminished 
amount  of  labor.  The  increase  or  diminution  of  the 
quantity  of  specie  m  circulation,  is  of  iniporiance,  only 
in  so  far  as  it  indicates  this  increase  of  productiveness, 
and  no  further.  We  estimate  a  man's  pros})erity,  not 
by  the  amount  of  money  in  his  possession,  but  by  his 
power  to  command  a  larger  or  a  smaller  amount  of  the 
objects  of  desire. 

V.  And  hence,  we  may  judge  of  the  truth  of  that 
oft-repealed,  but  worse  than  puerile  maxim,  "  It  mat- 
ters not  what  becomes  of  propertij^  so  long  as  the  mon- 
ey is  in  the  country."  If  a  million  of  dollars  be  lost  in 
an  unprofitable  canal,  or  ten  millions  are  sunk  by  a  profit 
less  ex|)eriment  in  manid'actures,  we  are  told,  that  it  is 
all  of  no  consequence  ;  nobody  is  any  poorer,  because 


214  OF    THE    FUNCTIONS    OF    MONET. 

the  money  is  in  the  countjy.  That  is,  if  a  n.ilhon  dol- 
lars' worth  of  labor  and  capital  have  ceased  to  exist,  we 
are  no  pooier  than  we  were  when  this  capital  was  exist 
ing.  and  yielding  to  its  owners,  and,  of  course,  to  the 
public,  its  annual  production.  If  so,  why  not  invest  the 
whole  capital  in  this  manner,  or  why  not  pay  men  for 
throwing  it  all  into  the  sea  ?  The  money  was  merely 
the  instrument  which  we  used  to  efiect  its  destruction  ; 
and  surely,  we  are  but  little  better  off',  because  the 
means  of  destruction  remain.  If  a  thief,  in  the  night, 
had  emptied  your  store-house  with  a  wheelbarrow,  you 
would  not  be  very  easily  convinced  you  were  no  poorer, 
because  lie  had  left  the  wheelbarrow  behind  him.  In 
the  late  disastrous  fire  in  New  York,  it  is  said  that  fifteen 
millions  of  capital  were  consumed.  I  did  not  hear  that 
any  specie  was  destroyed,  and  yet,  I  think  it  would  be 
difficult  to  show  to  the  sufferers,  that  no  hann  was  done, 
because  the  money  was  all  in  the  country.  Now,  it 
matters  not  in  what  manner  property  is  rendered  value- 
less^ whether  by  fire,  or  by  folly.  It  matters  not, 
whether  fire  does  the  work  for  nothing,  or  whether  you 
hire  workmen  to  do  it  at  heavy  wages.  It  matters  not, 
whether  the  fifteen  millions  be  turned  into  ashes,  and 
thus  rendered  valueless,  or  whether  it  be  turned  into  a 
canal,  which  is  equally  valueless.  If  your  store  and 
goods  are  burned  up,  you  would  give  away  the  ashes. 
If  it  be  turned  into  a  canal,  which  you  would  be  equall)' 
willing  to  give  away,  in  what  respect  are  you  belter  off" 
in  the  one  case,  than  in  the  other. 

VI.  We  have  already  seen,  that  the  natural  price  for 
(ho  precious  metals  is  the  cost  of  their  production,  and 
that  a  given  amount  of  them  will  be  required  for  effecting 
the  exchanges  of  the  community.  .Suppose,  now,  these 
metaL-  to  be  indestructible,  and  unchanged  in  quantity, 
and  the  quantity  of  other  productions  annually  created,  to 
be,  for  fifty  years,  the  same  ;  it  is  evident  that  specie 
and  other  products  would,  at  the  end  of  that  time,  bear 
the  same  ratio  to  each  other,  as  at  present  ;  that  is,  the 
money  ))rices  of  all  connnodities  would  remain  unchang- 
ed.    But  neither  af  these  is  the  case.     In  the  first  place, 


OF    THE    FUNCTIONS     OF    MONEY.  215 

the  productions  of  ihc  earth  annually  increase  ;  this  is 
evident,  from  tht  increase  of  its  number  of  inhabitants. 
And,  on  the  other  hand,  the  precious  metals  are  annually 
produced,  in  large  quantities,  from  the  mines.  But  they 
are  also  destructible,  and  suffer  slightly  from  wear  and 
tear,  when  used  as  coin  ;  and  they  are  also  raj'idly  con- 
sumed in  the  purposes  of  the  arts.  Now,  if  these  V\<) 
causes  exactly  counterbalanced  each  other  ;  that  is,  if 
the  supply  of  the  precious  metals  were  precisely  sut;h  as 
to  correspond  to  the  increase  of  productiveness,  and  to 
the  amount  consiniied  in  the  arts,  prices  would  still  re- 
main as  before.  If  the  increase  of  the  metals  were  not 
suOicient  to  su])ply  the  increased  demand  arising  from 
increased  jiroductiveness,  and  other  causes,  the  price  of 
the  metals  would  rise  ;  that  is,  the  price  of  other  things 
would  Dill.  And  if,  on  the  other  hand,  the  increase  of 
the  metals  were  greater  than  the  increase  of  productive- 
ness, their  price  would  fall  ;  that  is,  the  price  of  other 
things  would  rise.  Now  it  appears  that,  previously  to 
the  discovery  of  America,  for  several  centuries,  there 
was  no  great  change  in  the  relative  value  of  specie  and 
that  of  other  commodities.  That  event,  however,  by 
*hrowing  upon  the  world  an  immense  amount  of  the 
precious  metals,  effected,  at  once,  a  great  change  in  their 
value.  As  they  are  but  slowly  consumed,  this  diminu- 
tion of  their  value  continued  for  some  time  to  increase. 
This  depreciation  was  still  more  advanced,  by  the 
troubled  condition  of  Europe,  which  prevented  the  de- 
velopment of  her  productive  energies  ;  and  by  the  slow 
progress  which  she  was  making  in  the  arts  of  ci\iliza 
lion.  But,  of  late,  in  consequence  of  the  mtroduction 
of  machinery  and  the  division  of  labor,  and  of  improve- 
ments in  government  and  legislation,  the  increase  of 
productiveness-  has  more  than  kept  pace  with  ihn  in- 
creased supply  of  the  ))recious  metals.  Hence,  of  late, 
prices  have  fallen  ;  and  this  has  been  specially  the  case, 
ill  consequence  of  the  peace  of  the  world,  for  the  last 
twenty  years,  since  the  fall  of  Napoleon. 

These  remarks  are  illustrated  by  the  following  facts  : 
The   quantity  of  wheat,   in    F^ranre,  which   was    ex- 


216  OF    THE    FUNCTIONS    OF    MONEY. 

changed  in  1520,  for  512  grains  of  silver,  was  exchanged 
in  1536,  for  1063  grains;  in  1602,  for  2060  grains  ; 
and,  in  1789,  for  2012  grains  ;  thus  designating  a  varia- 
tion in  the  prices  of  silver,  according  to  the  principles 
which  we  have  suggested. 

Now,  as  the  progress  of  geology,  mining,  and  min- 
eralogy, will  probably  greatly  increase  the  production  of 
the  precious  metals  in  future,  it  is  probable  that  their 
prices  will  continue  to  fall.  Hence,  when  indefinite 
leases  are  given,  it  is  wise  never  to  fix  a  rent  at  a  given 
amount  of  silver  per  annum,  but  at  a  given  amount  of 
some  other  less  variable  product,  such  as  wheat.  Or  it 
would,  perhaps,  be  better  still,  to  average  the  rent  at 
definite  periods,  on  terms  which  should  be  equitable, 
and  of  which  neither  party  could  take  any  advantage. 
The  oldest  professorships  in  Oxford,  were  established 
upon  a  salary  of  £40  sterling  a  year.  This  sum  was, 
probably,  then  sufficient  to  support  a  teacher  hand- 
somely;  and  was  equal  to  the  rent  of  an  ordinary  farm. 
If  a  farm  had  been  leased  then,  at  £40  per  year,  per- 
petually, the  rent,  at  this  time,  would  have  been  but  a 
very  small  part  of  its  value.* 


SECTION  IV. 

OF    THE     AGENCY     OF    GOVERNMENT,    IN     RESPECT    TO 
A    CIRCULATING    MEDIUM. 

We  have,  thus  far,  said  nothing  concerning  the  agency 
of  government,    in    respect   to    a    circulating    medium. 

*  It  is  difTicuIt  to  ascertain,  wilh  any  dotrrpo  of  accuracy,  the  an- 
nual sujiply  and  tlie  annual  consuinption  of  llie  prrcious  niotals 
MnCuUorh,  a  liigli  aiilliorily,  estiiii.itcs  tlio  supply  from  the  Anieri 
can,  Eurnpean,  and  Hiisso  Asiatic  mines,  at  six  million  pounds  ster- 
.lUir  per  annnni.  and  the  consumption,  for  file  purposes  of  the  arts, 
at  nearly  four  millions  ;  leavinir  somewhat  more  than  two  million 
pounda  sterling  of  silver  and  ijold,  for  the  purposes  of  coining. 

Diclionanj  of  Commricc:  Art.,  ^'I'rc.cunis  Metals" 


AGENCY    OF    GOVERNMENT.  217 

The  reason  is,  that,  thus  far,  the  necessity  for  the  exer- 
tion of  such  agency  has  not  heen  apparent.  Two  men 
use  money,  in  exchange,  for  the  same  reason  tiuit  a  man 
uses  a  hammer  for  the  purpose  of  driving  a  nail  ;  he- 
cause  he  thus  economizes  both  lime  and  labor.  •  All 
men  usj;  money  in  exchanges,  for  the  same  reason  that 
all  men  use  hammers  for  the  purpose  of  driving  nails  : 
because  ihey  all  find  that  they  thus  save  time  and  labor. 

Had  governments  no  agency  at  all  in  the  matter,  the 
precious  metals,  as  a  circulating  medium,  might  have 
been  both  uitroduced,  and  universidly  employed  ;  mul 
they  xDould  have  been  so  introduced  and  employed,  as 
thej-  actually  tcere,  in  the  time  of  Abraham.  Hence, 
as  we  have  before  remarked,  a  circulating  medium,  de- 
rives its  use,  as  money,  from  its  inherent  fitness,  and 
the  desire  of  men  so  to  employ  it,  and  not  from  any 
agency  of  government  in  establishing  it.  While,  how- 
*^ver,  this  is  the  case,  and  while  this  is  always  to  be 
borne  in  mind,  there  is  yet  some  agency,  which  society, 
or  government,  which  is  its  agent,  may  exert,  that  shall 
increase  the  convenience  of  whatever  may  be  used  as  a 
circulating  medium. 

This  agency  has  reference  to  two  circumstances. 

1.  Whenever  any  substance  has  been  found  univer- 
sally adapted  to  the  purposes  of  exchange,  it  is  important 
tiiat  it  should  be  used  by  all  men,  unless  something  to 
the  contrary  be  specified  by  particular  contract.  If  I 
owe  a  man  for  a  hat,  and  when  I  come  to  pay  him,  he 
demand  payment,  not  in  silver,  but  in  beaver  skins,  I 
may  not  be  able  to  procure  them,  and  he  may  nold  me 
his  debtor,  and  imprison  me  accordingly.  If  I,  instead 
of  jJaying  him  in  silver,  ofTer  him  leather,  and  declare 
that  I  will  pay  him  in  nothing  else,  he  will  be  defrauded 
out  of  his  due.  Now,  to  prevent  disputes  without  end, 
it  is  desirable  that  something  be  fixed  ujion,  of  which 
the  tender  shall  discharge  forever  the  debtor's  obliga- 
tion. And  as  this  would  most  naturally  and  most  justly 
be  the  substance  which  all  men  have  chosen  for  a  circu- 
lating medium,  this  is  most  properly  chosen.  Hence, 
eoc"ety  or  government  have  a  right  to  establish  the 
19 


218  AGE^'cy  of  GovER^ME^;T. 

precious  metals  as  a  legal  tender;  that  1=;,  to  enact,  tlict 
if  a  man  declare  that  ]  owe  liim  ten  dollars,  and  I  ofler 
him  ten  silver  dollars,  if  he  choose  not  to  receive  them, 
I  am  under  no  obligation  to  give  myself  any  n'.ore 
trouble  about  it.  The  tender,  on  my  part,  is  a  full  re- 
lease. I  am  under  obligation  to  offer  nothing  else ;  and 
he  has  no  right  to  demand  any  thing  else.  Nor  is  there, 
in  this,  any  oppression.  If  a  man  wish  to  be  paid  m 
soi".iething  besides  money,  he  can  always  specify  it  in  the 
contract  ;  and  thus  his  object  can  be  accomplished. 
The  whole  effect  of  such  a  law  is,  to  prevent  disputes. 
and  to  enact  what  shall  be  a  full  and  valid  release  frcjii 
obligation,  when  nothing  specific  has  been  agreed  upon. 
But,  secondly  :  If  any  substance  be  used  as  a  circu 
lating  medium,  it  is  evident  that  its  utility  will  be  great- 
ly increased  by  several  circumstances.  Of  these,  the 
principal  are  :  — 

1.  That  it  be  of  uniform  purity.  Were  it  otherwise, 
every  piece  must  be  tested  by  chemical  analysis.  This 
would  be,  of  course,  impossible  ;  and  hence  its  utility 
would  be  greatly  diminished. 

2.  That  it  be  divided  into  portions  of  such  a  size,  as 
shall  be  most  convenient  for  the  purposes  of  exchange. 
Were  coins  a  foot  in  diameter,  or  as  small  as  the  head 
of  a  pin,  they  would,  in  either  case,  be  almost  useless. 
The  former  could  be  used  only  in  large  exchanges  ;  the 
latter  would  be  so  small  as  to  be  frequently  lost,  and  of 
so  small  a  value  as  to  consume  a  great  deal  of  time  ir 
counting  them. 

3.  That  it  should  be  so  prepared,  that  each  piece 
shall,  on  inspection,  indicate  its  value,  and  also  indicate 
that  no  change  has  been  effected  in  that  value,  by  de- 
sign. To  give  to  the  precious  metals  these  qualifica- 
tions, is  the  intention  of  coining. 

But  it  is  evident,  from  a  moment's  consideration,  that 
the  preparation  of  coin,  in  this  manner,  for  the  public 
use,  could  never  be  safely  entrusted  to  individuals. 
The  temptations  to  dishonesty  are  too  great  for  ordinary 
human  virtue.  It  is  evident,  that  such  a  work  should 
be  executed  by  those,  whose  interest  would  lead  ihein 


AGENCY    OF    GOVERNMENT.  210 

Jo  perform  it  with  the  greatest  possible  fidelity.  Hence 
k  is,  that  individuals  have,  in  all  civilized  countries,  sur 
rendered  the  right  of  coining  money  to  the  whole  soci- 
ety, that  is,  to  government  ;  and  governments  have  exe- 
cuted it  by  means  of  agents  appointed  for  that  purpose. 
These  agents  should  always  be  placed  under  such  cir- 
cumstances, that  their  interest  is  strongly  on  the  side  of 
honesty  ;  and  the  supervision  over  them  should  be  of 
auch  a  nature,  that  any  failure,  either  of  skill  or  of  in- 
tegrity, could  be  easily  detected. 

Such  are  the  limits,  within  which  the  powers  of  gov- 
ernment, in  respect  to  money,  are  restricted  ;  and  such 
is  the  reason,  for  which  this  power  is  conferred.  Of 
the  manner  in  which  a  government  should  execute  this 
trust,  it  is  only  necessary  to  add  a  few  remarks. 

1.  It  is  the  business  of  the  governnient  to  regulate 
the  purity  of  money.  Inasmuch,  however,  as  this 
whole  power  is  conferred  for  the  public  convenience, 
the  exercise  of  this  power  should  never  be  on  the  ground 
of  arbitrary  enactment,  but  of  public  convenience. 
Thus,  as  money  is  liable  to  loss  from  wear,  and  as  this 
loss  is  rendered  less  by  the  addition  of  a  small  portion 
of  alloy,  which  renders  it  harder  ;  and,  also,  as  the  puri- 
fication of  the  precious  metals  from  all  alloy,  would  be 
a  process  of  great  and  useless  expense,  it  is  for  the  con- 
venience of  all  parties,  that  some  portion  of  alloy  should 
be  allowed  to  remain  when  the  metal  is  prepared  for 
coining.  The  degree  of  this  adidteration  should,  how- 
ever, be  fixed  by  law,  and  should  thus  be  publicly 
known,  and  should  be  invariable. 

2.  The  government  should  regulate  the  size  and  form 
of  the  coin. 

The  size  of  the  pieces  should  be  such,  as  shall  best 
adapt  them  to  the  purposes  of  exchange. 

Their  relative  proportions  to  each  other,  should  be 
such  as  to  ada])t  them  most  conveniently  to  the  purposes 
of  enumeration.  On  this  account,  the  decimal  system, 
adopted  by  the  United  States,  is  probably  preferable  to 
any  other.  The  size  having  been  once  fixed  npon,  it 
should  remain  invariable. 


220  AGENCY    OF    GOVERNMENT. 

In  respect  to  the  form  of  money,  we  may  add  : 

1.  It  should  be  adapted  to  convenience  lor  counting 
On  this  account,  flat  coins  are  always  preferred. 

2.  It  should  present  the  least  possible  surface  to  fric- 
tion. On  this  account,  the  thicker  the  pieces  are,  the 
better,  provided  they  be  not  inconvenient  for  piling. 

3.  The  whole  surface,  or  so  much  of  it  as  is  possible, 
should  be  so  ornamented,  that  if  any  of  the  metal  should 
be  feloniously  filed,  or  worn  away,  it  may  easily  be  dis- 
covered. For  the  same  reason,  the  edges  should  always 
be  milled. 

4.  To  reduce  the  amount  of  friction,  as  much  as  pos- 
sible, the  rim  of  the  edge  should  be  so  raised  as  to  pro-, 
tect  the  face. 

It  would  be  of  advantage,  also,  if  the  amount  of  pure 
metal  in  every  piece  were  always  stamped  upon  its  face. 
This  would  be  an  additional  check  against  any  interfer- 
ence on  the  part  of  government,  with  the  purity  or  the 
weight  of  coin.  It  would  also  allow  persons  entering 
mto  contracts,  to  make  them  either  in  weight  or  in  de- 
nomination, as  they  chose  ;  and  thus,  give  them  addi- 
tional means  of  protection  against  interference  of  this 
sort,  even  if  were  attempted. 

Inasmuch  as  a  piece  of  metal  coined  is  worth  more 
than  a  piece  uncoined  ;  that  is,  as  it  has  additional  value, 
derived  from  the  means  of  verification  conferred  upon 
it  ;  as  this  additional  value  is  the  property  of  the  owner, 
and  as  the  conferring  of  it  is  a  costly  operation,  it  is 
right  that  the  owner  should  pay  for  it.  Were  nothing 
charged  for  it,  as  it  is  worth  more  when  coined  than 
when  uncoined,  when  it  could  not  profitably  be  sent 
abroad  in  one  form,  it  mighi  be  so  sent  in  the  other 
form  ;  hence,  when  it  could  not  be  sent  in  bullion,  it 
might  be  coined,  and  sent  away  in  money.  Hence, 
there  would  be,  in  such  a  case,  a  premium  given  to  its 
exportation.  But,  on  the  other  hand,  the  charge  for 
this  operation  should  be  just  sufficient  to  defiay  the  eX" 
pen.ics  of  the  work.  If  more  than  this  is  charged,  so 
that  coining  would  be  a  profitable  business,  it'  woidd 
scon  be  done  by  private  mdividuals,  for  gain  ;    and  the 


AGENCY    OF    GOVERNMENT.  221 

country  would  be  fioofled  with  coin  made  in  other  coun- 
tries, and  be  thus  liable  to  great  inijjosiiiou.  'J'lio  gov- 
ernment would  thus  soon  lose  the  business.  11  it  be 
done  at  the  lowest  practicable  price,  as  no  one  can 
make  any  thing  by  the  operation,  all  temptation  to  pri- 
vate coining  is  taken  away. 

Inasmuch  as  money  is  lial)le  to  continual  wear  from 
friction,  and  as  it  is  thus  steadily,  though  slowly,  dimin- 
ished in  value,  it  at  last  becomes  so  much  worn,  as  to 
be  unfit  for  circulation  ;  because  its  impression  is  ef- 
faced, and  also  because  it  contains  much  less  than  the 
standard  quantity  of  metal.  When  it  becomes  thus  unfit 
for  circulation,  on  whom  is  the  loss  to  fall,  on  the  last 
holder,  or  on  the  whole  community  ?  Doubtless,  on 
the  latter.  The  last  holder  has  derived  no  more  benefit 
from  it,  than  any  one  of  the  thousand  holders,  each  one 
of  whom  has  contributed,  by  using  it,  to  depreciate  its 
value  ;  and  there  is  no  reason  why  he,  in  preference  to 
any  other,  should  bear  the  whole  loss.  In  other  words, 
svorn-out  coin  should  always  be  received  at  the  mint,  at 
par,  and  exchanged  for  new.  This  remark,  however, 
should  apply  only  to  worn-out  coin  ;  and  not  to  coin 
which  has  been  fraudulently  diminished  in  value. 
Pierced  or  clipped  coin,  should  not  be  exchanged. 
This  will  tend  to  prevent  every  one  from  receiving  it  ; 
and  will  thus  tend  to  keep  it  in  the  hands  of  those  who 
have  robbed  it  of  a  part  of  its  value. 

If  such  be  the  agency  which  a  government  is  called 
upon  to  exert,  in  respect  to  a  circulating  medium,  it  will 
be  seen  that  it  has  no  right  to  interfere  in  any  other  re- 
spects.    Hence,  for  instance  : 

1.  It  has  no  right  to  prevent  the  exportation  or  im- 
portation of  specie.  This,  like  any  other  commodity, 
if  let  alone,  will  regulate  itself.  Specie  will  never  be 
sent  abroad,  unless  it  be  for  the  advantage  cf  the  coun- 
try that  it  should  be  so  sent  abroad.  The  actual  mone- 
tary condition  of  a  country  cannot  be  affected  by  arbi- 
trary acts.  Besides,  a  man  has  the  same  right  over 
whatever  siher  or  gold  he  may  possess,  as  he  has  over 
cotton,  or  wool,  or  any  thing  else  ;  and  he  has  just  the 
19* 


222  AGENcr  ov   government. 

same   right   to   exchange  it  icilh  any  one^  and  for  any 
things  as  he  may  ihiuk  for  his  advantnge. 

2.  A  government  has  no  right,  arbitrarily^  to  alter 
the  value  of  money  ;  that  is,  to  say  that  a  dollar  shall 
contain  either  more  or  less  silver  than  it  now  contains. 
To  do  so,  is,  of  necessity,  to  interfere  with  private  con- 
tracts ;  and  thus  to  expose  one  half  of  the  community,  a 
prey  to  the  dishonesty  of  the  other  half.  If  A  have 
prom.ised  to  pay  B  one  thousand  dollars  ;  meaning,  by 
this,  one  thousand  ounces  of  silver  ;  and  the  govern- 
ment enact  that  the  dollar  shall  hereafter  contain  only 
half  an  ounce  of  silver,  and  ohlige  B  to  receive  half 
ounces,  instead  of  ounces  ;  they  defraud  him  of  pre- 
cisely half  his  due.  This  will  be  the  case,  not  only 
with  B,  but  with  all  the  creditors  in  the  whole  commu- 
nity. It  is  just  the  same  interference,  as  though  they 
should  enact,  that  a  debt  of  one  thousand  bushels  of 
wheat  should  be  paid  with  five  hundred  bushels  ;  or, 
that  a  debt  of  a  yard  of  broadcloth  should  be  paid  with 
half  a  yard. 

If,  however,  the  coin,  by  common  consent,  is  found 
to  need  a  change  of  any  kind,  and  the  public  conven- 
ience actually  require  it,  it  is  to  be  done  by  common 
consent,  after  sufficient  notice  of  the  change  has  been 
given,  and  be  so  done,  that  all  contracts  existing  at  the 
time,  be  left  inviolate.  If  the  amount  of  silver  in  a  dol- 
lar, in  this  country,  should  ever  be  changed,  it  should 
be  effected  by  exchanging,  at  the  mint,  the  present  dol- 
lar, at  its  value  in  silver,  for  a  new  dollar,  at  its  value  in 
silver  ;  so  that  all  contracts  now  in  existence,  should  be 
fulfilled  according  to  the  terms  of  the  agreement.  A 
still  better  method  would  probably  be,  to  issue  a  new 
coin,  with  another  name.  This,  I  believe,  has  lately 
been  done  in  Great  Britain.  Instead  of  the  guinea,  of 
twenty-one  shillings,  a  gold  coin,  of  twenty  shillings,  has 
been  introduced,  called  a  sovereign. 

3.  A  government,  I  think,  has  no  right  to  fix  the  rel- 
Btive  value  between  the  precious  metals.  This  cannot 
be  done,  in  fact,  because  the  relative  value  is  liable  to 
continual  fluctuation.     If  both  are  a   legal   tender,  the 


AGENCY    OF    GOVERNMENT.  223 

debtor  has  the  right  of  paying  in  that  which  he  prefers  , 
and,  as  he  may  be  always  expected  to  choose  to  pay  in 
the  cheaper,  he  may  thus  frecjuently  defraud  his  creditor 
to  the  amount  of  the  fluctuation.  It  is  better  to  have 
but  one  a  legal  tender,  and  leave  the  other,  as  any  other 
matter  of  merchandise,  to  be  exchanged  by  special  con- 
tract between  the  parties.  In  this  respect,  I  think  the 
system  of  Great  Britain  preferable  to  our  own.  Gold, 
as  has  been  remarked,  is  tliere  the  only  legal  tender,  for 
all  sums  above  twenty  shillings  ;  and  silver,  for  all  sums 
below  that  amount.  Hence,  whenever  contracts  are 
made,  their  amount  determines  the  metal,  in  which  the 
payment  is  to  be  made. 

Mr.  Condy  Raguet,  in  his  last  treatise  on  currency 
and  banking,  has,  we  think,  conclusively  shown,  that 
the  present  law  fixing  the  relative  values  of  silver  and 
gold  in  this  country,  is,  in  every  respect,  injurious.  Its 
tendency,  clearly,  is,  to  drive  the  one  or  the  other  metal 
out  of  the  country,  and  thus  to  diminish,  instead  of  in- 
creasing, the  amount  of  specie  in  circulation.  And^ 
besides,  inasmuch  as  the  legal  tender  in  Great  Britain  is 
gold,  it  would  be  much  better  that  ours  should  be  silver. 
A  scarcity  of  specie  in  one  country,  would  thus  be  less 
felt  in  the  other.  This  is  a  consideration  of  great  mo- 
ment where  two  nations  are- so  clos6ly  connected  as  this 
and  Great  Britain.  As  we  are  at  present  situated,  the 
least  variation  in  one  country  is  immediately  felt  in  the 
other. 


CHAPTER  THIRD. 

OF    A    CIRCULATION    BY    MEANS    OF    A    PAPER 
CURRENCY. 


SECTION  I. 

OF  THE  NATURE  OF  BANKS  IN  GENERAL. 


BANKS  OF  DEPOSIT  AND  EXCHANGE. 

We  have  already  treated  somewhat  at  large  upon  the 
subject  of  division  of  labor  ;  the  circunistances  in  our 
constitution  by  whirl)  it  is  introduced  ;  and  the  benefits 
which  result  to  every  class  of  the  coniniuniiy  from  its 
introduction.  We  have  also  seen,  liiat  division  of  labor 
IS  always  carried  on  most  successfully,  when  it  is  united 
with  the  use  of  some  natural  agent.  Thus,  in  the  man- 
ufacture of  cotton,  by  the  union  of  steam  or  water  power 
and  machinery,  with  division  of  labor,  production  is 
greatly  increased  ;  and  every  class  of  society  is  en- 
riched. And  we  have  also  seen,  that  the  one  could  not 
be  carried  to  great  perfection,  without  tJie  employment 
of  the  other  ;  and  also  that,  in  the  nature  of  things,  the 
one  actually  suggests  and  renders  necessary  the  employ- 
ment of  the  other. 

Now,  all  these  remarks  apply,  with  the  same  force,  to 
the  labor  of  exciiange,  as  to  any  other  labor.  From  the 
necessities  of  society,  it  is  evident  that  a  very  large  por- 
tion of  its  labor  must  be  the  labor  of  exchange.  The 
increase  of  this  labor  would  naturally  load  to  the  discov- 
ery of  some  natural  agent,  by  which  it  might  be  exe- 
cuted at  less  expense  of  timfe  and  industry.     At  first, 


BANKS  OF  DErOSIT  AND  EXCHANGE.     225 

tlie  rudest  iiistrnnK^nts,  such  ns  cattle,  ;uid  the  baser 
metals,  were  eMi[jh)yed.  These  gracUiully  gave  }));ice  lo 
tlie  more  jjerfect  instiuments,  gold  and  silver.  As  the 
use  of  this  more  productive  instrument  increased  very 
greatly  the  number  of  exciianges,  and  tiius  lequiied 
more  laborers,  instead  of  fewer,  in  tiiis  department  of 
industry,  it  was  natural,  in  the  next  place,  that  divisions 
of  labor  should  be  Introduced,  in  order  to  use  the  instru- 
ment, or  natural  agent,  with  the  greatest  degree  of  suc- 
cess ;  and  also  to  accomf)lish,  with  a  given  amount  of 
industry,  the  greatest  amount  of  exciianges. 

Division  of  labor.,  in  this  department  of  industry,  as  in 
every  other,  has  proceeded  from  rude  beginnings,  to 
greater  and  greater  perfection.  At  first,  its  benefits 
were  but  imperfectly  appreciated.  By  experiment, 
they  were  more  and  more  unfolded  ;  and  now,  although 
its  principles  may  not  be  generally  understood,  yet,  it  is 
coming  into  very  general  use  throughout  the  civilized 
world.  Instead  of  banks  in  none  but  the  great  marts  of 
trade,  as  was  the  case  a  century  or  two  ago,  we  find 
them,  in  free  states,  employed  in  towns  and  villages, 
over  the  whole  community  ;  and,  when  judiciously  ad- 
ministered, their  eU'ects  are  the  same  upon  the  small,  as 
upon  the  great  sections  of  the  community. 

The  word  hank,  is  said  to  be  of  Italian  origin.  "  In 
the  infancy  of  European  commerce,  the  Jews  in  Italy 
were  wont  to  assemble  in  the  market  places  of  the  prin- 
cipal towns,  seated  on  benches,  ready  to  leid  money  ; 
and  the  term  bank,  is  derived  from  the  Italian  woid 
banco,  a  bench."  When  any  of  these  money-lenders 
failed,  his  bench  was  broken.  Hence,  the  origin  of  the 
word  bankrvpl. 

1.  We  have  shown  how  very  great,  in  a  civilized 
country,  must  be  the  amount  of  exchanges.  We  have 
also  shown  that  these  exchanges  are  greatly  facilitated 
by  tneans  of  the  U5e  of  a  metallic  currency.  But  it  will 
be  evident,  that,  were  the  labor  of  exchange  divided  no 
more  perfectly  than  we  have  thus  far  supposea,  a  variety 
of  inconveniences  would  unavoidably  occur.  Among 
\hese  are  the  following:: 


226     BANKS  OF  DEPOSIT  AND  EXCHANGE. 

1.  Were  men  thus  to  keep  on  hand  so  large  an 
amoiiiit  of  the  precious  nieials,  and  aciually  to  make 
their  exchanges  by  means  of  metallic  transfer,  much  time 
would  be  consumed  in  transportation.  A  large  number 
of  persons  must  be  emj)lo)ed  constantly,  in  no  othet 
business  than  in  carrying  silver  and  gold  from  one  mer- 
chant to  another,  in  the  same  place,  and  between  tho 
merchants  in  different  places. 

2.  Were  exchanges  to  be  made  directly,  through  thfi 
medium  of  money,  it  is  evident  that  every  payment  must, 
of  necessity,  be  counted  by  both  parties.  This,  in 
large  payments,  would  consume  much  time,  and  cause 
great  wear  and  tear  of  the  coin.  Were  a  large  mercan- 
tile house,  which  transacts  exchanges  to  the  amount  of 
from  ten,  to  one  hundred  thousand  dollars'  worth  in  a 
day,  obliged  to  count  all  the  money  paid  and  received, 
every  one  must  see  that  more  than  thiice  the  present 
number  of  agents  must  be  employed  ;  and  thus,  the  ex- 
penses of  the  establishment  would  he  greatly  increased. 
The  effect  of  this  additional  expense  of  labor,  would  be 
very  greatly  to  increase  the  cost  of  exchanges  ;  that  is, 
the  price  of  products. 

3.  The  precious  metals  are  small  in  bulk,  and  there- 
fore, are  very  liable  to  bs  stolen.  The  pieces  of  the 
same  denomination  being  of  precisely  the  same  form  and 
impression  ;  if  stolen  they  cannot  be  identified.  Plence, 
more  than  usual  care  is  necessary,  in  order  to  secure 
them  against  robbery.  Were  every  individual,  there- 
fore, to  keep  on  his  premises,  the  whole  amount  of  the 
precious  metals  n(3cessary  to  effect  his  exchanges,  every 
one  would  be  obliged  to  guard  his  projierty  with  increas- 
ed vigilance,  both  by  day  and  by  night.*  He  would  be 
his  own  banker,  and  must  add  to  his  present  expenses, 
all  those  expenses  necessary  to  the  security  of  a  bank. 

But  let  us  now  see  by  how  simple  an  arrangement  all 
these  difficulties  might  be  obviated.      Suppose  this  labor 


*It  is  nppropriato  h^ro  to  romnrk.  that  the  pstablishiiipnt  of  bankj 
has,  on  this  account,  (rrcatly  diiniiiislicd  the  frequency  of  the  critnes 
of  house-breaking  andliighway  robbery. 


BANKS  OF  DEPOSIT  AND  EXCHANGE.     227 

were  divided,  and  that  all  llie  merchants  in  a  towr.,  in- 
stead of  being  every  one  his  own  hanker,  agreed  togeth- 
er toeni[jloy  a  single  person  to  become  the  banker  for  ah 
of  them.  Let  us  suppose  this  person  to  procure  a  safe 
repository  for  all  the  specie  in  the  neighborhood,  and  to 
become  responsible  for  its  safe  keeping.  Suppose,  also, 
that  these  merchants,  instead  of  keeping  their  money 
themselves,  all  lodged  it  with  him,  and  that  he  opened 
an  account  with  each  one,  crediting  him  with  whatever 
he  (le[)osited,  and  debiting  him  to  all  that  he  withdrew  ; 
and  that  every  one  was  at  liberty  to  withdraw,  at  any 
moment  he  chose. 

It  is  manifest,  that  in  such  a  case,  if  A  owed  B  one 
thousand  dollars,  he  would  not  send  to  the  bank  and 
vviiiidraw  the  money  for  B  to  replace  it  again,  but  would 
give  to  B  an  order  for  one  thousand  dollars,  which  B 
would  present  to  the  banker,  and  the  one  thousand  dol- 
lars would  be  withdrawn  from  A's  account,  and  added  to 
that  of  B.  If  B  owed  C,  he  would  do  the  same.  C 
would  do  the  same  to  D,  and  perhaps  D  vvould  owe  A, 
and  vvould  pay  him  in  the  same  manner.  At  the  close 
of  the  day,  their  bank  accounts  would  stand  just  as  they 
were  at  the  beginning  ;  and  yet  there  have  been  four  pay- 
ments made  and  received,  of  one  thousand  dollars  each. 
Yet,  not  one  cent  of  the  specie  has  been  touched.  Not 
a  dollar  of  it  has  been  counted.  It  has  been  all  done 
by  a  few  entries  made  on  the  books  of  the  bank,  and 
done  in  a  very  few  minutes.  In  this  manner  the  writing 
of  a  few  lines  saves  all  the  labor  of  repeated  transporta- 
tion, of  as  frequent  counting  of  coin,  and  also  all  the 
cost  of  wear  which  must  arise  from  every  such  o|)era- 
lion.  Besides,  inasmuch  as  no  more  vigilance  is  neces- 
sary to  secure  frohi  depredation  the  whole  sum  of  specie 
than  any  one  part  of  it,  it  is  evident  that  great  additional 
labor  is  saved  in  this  respect  also. 

Suppose,  now,  the  business  of  this  society  to  become 
so  extensive,  that  one  banker  is  unable  to  transact  the 
operation  of  all  of  these  transfers,  ajid  another  is  also 
employed,  who  opens  another  banking-house  on  the  same 
principles.      If  we  bear  in  mind  the  fact,   that  the  pur- 


228      BANKS  OF  DEPOSIT  AND  EXCHANGE. 

chases  and  pales  must,  in  the  end,  be  equal  to  each  oth 
er ;  that  is,  that  every  man  receives  as  much  money  as  he 
pays  aivciy^  the  transactions  of  the  day  must,  as  before, 
equalize  each  other.  If  both  parties  transact  their  busi- 
ness at  the  same  bank,  this,  as  it  has  been  just  shown,  will 
be  the  case.  If  they  transact  their  business  at  difierent 
banks,  it  will  but  slightly  difler.  A  pays  B  in  a  draft  on' 
the  first  bank,  which  B  deposits  in  the  second  bank.  B 
pays  C  in  a  draft  on  the  second  bank,  which  C  deposits  in 
(he  first  bank.  At  the  close  of  the  day,  these  banks  ex- 
change drafts,  and  thus,  without  any  labor  or  counting,  or 
transportation,  by  merely  writing  a  few  words  in  a  bank  leg- 
er,  the  whole  transaction  is  completed.  It  is  hardly  possi- 
ble to  find  a  case,  in  which,  by  the  division  of  labor,  a  great- 
er increase  of  productiveness  is  given  to  human  industry. 
Now  the  case  will  be  the  same,  if  we  consider  the  in- 
tercourse between  difierent  cities  and  difierent  countries, 
or  in  difierent  countries.  It  is  to  be  borne  in  mind,  that 
the  sales  and  purchases  of  every  society,  as  well  as  of 
every  individual,  must  be,  substantially,  equal.  The 
reason  is  obvious  ;  for  a  man  can  buy  only  as  muc  h  as  he 
can  pay  for  ;  and,  as  much  as  he  can  pay  for,  he  will  gen- 
erally buy  ;  and,  if  he  buy  skilfully,  he  will  lose  nothing 
by  the  exchange.  ]n  other  words,  all  exchaiige  is  ulti- 
mately and  substantially  exchange  in  kind.  And,  as  the 
things  exchanged  are,  at  the  place  of  exchange,  of  equal 
value,  the  purchases  and  sales  must  be  equal  to  each  oiliei*. 
If  Boston  buy  ten  million  dollars'  worth  of  New  York, 
it  must  send  ten  million  dollars' worth  with  which  to  pay 
for  it.  If  both  parties  made  these  exchanges  by  means 
of  money,  not  only  the  goods,  but  also  the  money,  must 
ue  transported  to  and  fro,  at  every  exchange.  By  a  very 
simple  arrangement  all  this  trouble'may  be  avoided 
Thus,  for  instance,  suppose  A,  in  Boston,  sells  to  B, 
in  New  York,  ten  thousand  dollars'  worth  of  domestic 
cottons  ;  he  is  entitled  to  draw  on  B  for  that  am<  int  ; 
that  is,  to  order  him  to  pay  it,  to  whomsoever  he  will. 
Again  :  Suppose-C,  in  New  York,  sells  to  D,  in  Bos- 
ton, ten  thousand  dollars'  worth  of  French  silks  ;  he,  in 
hke  manner,  is  authorized  to  draw  on  D.  lor   that   sum. 


BANKS    OF    DEPOSIT    AND    EXCIIXNGE.  229 

A  sells  his  (iiaft  on  B,  to  a  bank  in  Boston,  tliat  is,  he 
receives  in  Boston  the  money  due  to  him  in  New  York. 
C  sells  to  a  bank  in  New  York  the  draft  on  Boston, 
that  is,  he  receives  in  New  York,  the  money  due  to  him 
i.i  Boston.  The  banks  exchange  these  drafts  with  each 
other,  and  collect  the  proceeds,  receiving  a  percentage 
for  their  trouble.  Thus,  these  debts  mutually  cancel 
each  other,  without  removing  the  specie  from  one  place 
to  the  other  ;  and  with  only  the  labor  of  making  a  few 
entries  in  a  leger.  In  this  manner  the  amount  of  money 
necessary  to  perform  the  exchanges  of  a  country  is 
greatly  diminished,  and  all  the  loss  to  which  money  in 
transitu  is  exposed,  is  avoided. 

We  see,  therefore,  that  if  the  exchanges  between  two 
places  were  equal,  the  whole  business,  of  payment  might 
be  made  without  the  transfer  of  any  specie  whatever. 

But  suppose  the  business  between  two  places  were 
not  equal;  that  is,  suppose  that  Boston  purchased  of  New 
York  more  than  it  sold  to  that  place  ;  suppose,  for  m- 
stance,  that  Boston  purchased  of  New  York  ten  million 
dollars'  worth,  and  sold  to  that  place  only  five  million 
dollars'  worth.  In  this  case,  one  half  the  payments 
would  be  made  in  productions,  in  the  manner  we  have 
already  suggested.  The  remaining  five  millions  must, 
however,  be  provided  for,  in  some  other  way.  One  ob- 
vious way  would  be,  to  send  this  remainder  in  specie. 
But,  it  will  be  asked,  how  is  this  five  millions  of  specie 
to  be  provided  ?  We  answer,  by  sending  the  five  mil- 
lions of  products  which  would  otherwise  have  been  sent 
to  New  York,  to  some  other  place,  where  specie  can 
be  had  at  the  cheapest  rate  ;  and  thus  paying  for  what 
we  have  purchased  at  New  York,  by  two  exchanges  in- 
stead of  one.  This  is  one  method.  Another  method 
would  be,  for  Boston  to  send  five  millions  of  her  do- 
mestic products  to  some  other  market,  say  to  the  West 
Indies,  and  exchange  it  for  some  other  product,  say  cof- 
fee, or  sugar  ;  and  remit  these  to  New  York,  to  pay  the 
balance  of  her  debt.  This  would  be  sold,  the  proceeds 
deposited  in  New  York,  and  he  who  owed  the  New  York 
merchant  would  purchase  a  draft  in  Boston,  of  him  who 
20 


230     BANKS  OF  DEPOSIT  ANE  EXCHANGE. 

had  in:ported  the  coffee  or  sugar  ;  and  thus  the  debt 
would  be  liquidated. 

Now,  it  is  niaiiifest,  that  it  is,  to  Boston,  of  no  con- 
sequence in  which  way  she  pays  this  debt  ;  whethei  by 
sending  directly  to  New  York  ten  millions  of  her  piod- 
ucts  ;  by  sending  five  millions  to  New  Yoik  and  five 
millions  to  South  America  in  exchange  for  specie  ;  or 
by  sending  five  millions  to  New  York  and  five  millions  to 
Cuba  in  exchange  for  coffee  and  sugar.  In  either  case, 
she  pays  but  ten  millions  ;  and  the  way  in  which  it  is 
paid  is  a  matter  of  indilference.  And  it  is,  also,  obvious 
in  which  manner  Boston  will  choose  to  pay  her  debt. 
Every  one  who  has  a  debt  to  ))ay,  will  pay  it  in  that 
which  will  liquidate  it  at  the  least  expense  to  hiiliself. 
If  five  millions  of  specie  can  be  procured  by  four  and  a 
half  millions  of  other  products,  it  will  be  best  to  pay  the 
debt  in  specie.  If  stigar  and  cofiee  worth  five  millions 
in  New  York,  can  be  j)urchased  by  four  and  a  half  mil- 
lions' worth  in  Boston,  she  will  choose  to  import  coflee 
and  sugar  in  payment.  And  thus,  the  account  will  be 
adjusted,  in  every  case,  according  to  the  interests  and 
conveniences  of  the  respective  parties  ;  that  is,  of  the 
whole  community. 

This  is  the  case,  if  we  take  into  consideration  two 
trading  places  in  the  same  country.  But  the  case  is  the 
same  witl)  the  trading  cities,  over  the  whole  world.  And 
by  thus  allowing  every  thing  to  regulate  itself,  the  whole 
business  of  exchange  is  adjusted. 

Supj)ose,  for  instance,  that  Great  Britain  has  pur- 
chased of  us  more  than  we  receive  in  retiu'n.  There 
will  then  be  a  portion  of  her  debt  unpaid  ;  and  there 
will  then  be  a  demand  for  something  wherewith  to  oay 
I't.  In  this  case,  drafts  on  America  will  rise  ;  that  is, 
those  who  have  j)ayments  to  make  will  overbid  each 
other,  and  drafts  will  increase  in  price.  In  this  case,  a 
French  merchant,  who  has  sent  a  cargo  of  silks  to  Amer- 
ica, will  find  that  he  can  get  more  for  it,  by  selling  in 
London,  drafts  on  his  correspond(;nt  in  New  York,  than 
by  importing  American  produce.  In  this  case,  he  will 
sell  to  the  London  mercliant  drafts  to  the  whole  amount 


BANKS  OF  DEPOSIT  AND  EXCHANGE.     231 

of  his  cargo  ;  that  is,  Englniicl  pays  France,  for  sending 
to  America  sufficient  producj  to  pay  the  deficiency 
which  she  is  unable,  profilably,  to  supply  from  her  own 
productions.  In  this  manner,  the  deficiency  of  the  ex- 
ports of  the  first  country  to  the  second,  is  made  up  by 
the  excesses  of  a  third  ;  and,  as  every  one  receives  as 
much  as  he  pays  out,  and  im])orts,  on  the  whole,  as 
much  as  he  exports,  by  free  connnunication  among  them- 
selves, the  balance  is  speedily  adjusted. 

Hence,  bills  of  exchange,  or  orders  of  payment  for 
goods  already  delivered  at  any  j)articular  })lace,  become 
an  article  of  merchandise,  as  much  as  any  thing  else. 
This  being  the  case,  it  is  of  importance  that  some  per- 
sons should  devote  themselves  to  this  branch  of  labor. 
By  these  means,  both  parties  know  how  they  can  be 
best  accommodated.  Tiie  sellers  know  where  to  sell, 
and  the  buyers  where  to  purchase.  For  the  transaction 
of  this  business,  banks  have  great  facilities,  on  account 
of  the  capital  which  they  can  command,  and  the  commu- 
nication, which,  for  other  reasons,  they  of  necesbity  hold 
with  each  other,  and  hence  they  are  most  commonly  thus 
employed.  Almost  all  our  domestic,  and  much  of  oui 
foreign  exchange  is  negotiated  at  present  by  means  of 
banks.  They  act  as  brokers,  by  bringing  buyers  and 
sellers  toge^ther,  and,  by  reason  of  their  communication 
with  each  other,  they  are  enabled  to  transact  the  busi- 
ness of  exchange  of  drafts  with  great  security  and  at  lit- 
tle expense.  • 

Such,  I  suppose  to  be  some  of  the  principal  functions 
of  banks,  as  offices  of  deposit.  They,  by  means  of  di- 
vision of  labor,  dimiinsh  the  amount  of  the  circulating 
medium  necessary  to  carry  on  the  exchanges  of  a  coun- 
try ;  they  greatly  diminish  the  labor  of  transpoitation 
Qiid  of  counting  money  in  the  same  place,  and  almost 
remove  the  necessity  of  transporting  it  between  different 
places. 

The  Bank  of  Amsterdam  was  purely  a  bank  of  de- 
posit. It  received  the  specie  of  the  merchants  of  the 
city,  and  gave  them  acknowledgment?,  which  were 
transferable,  like  specie  ;  and,  by  the  transfer  of  these. 


232  BANKS    OF    DISCOUNT    OR    LOAN. 

on  the  books  of  the  bank,  all  large  pavmenis  were  uni- 
versally made.  And  so  great  was  the  confidence  in  the 
management  of  the  bank,  that  certificates  of  these  de- 
posites  were  current  throughout  Europe.  Adam  Smith 
attributes  the  origin  of  this  bank,  to  the  desire  of  the 
Dutch  to  prevent  their  coin  from  migrating  into  the  sur- 
rounding states,  and  being  replaced  by  the  inferior  and 
debased  coin,  with  which  they  were  liable  to  be  inun- 
dated. That  this  might  have  been  the  idea,  from  whiidi 
the  first  conception  of  such  a  bank  originated,  is  very 
possible.  But,  whoever  will  observe  the  advantages  of 
such  an  nistitution,  as  they  have  been  stated  above,  must 
be  aware,  that  when  the  transactions  of  a  commercial 
city  became  numerous,  and  the  exchanges  became  ac- 
tive, merchants  could  not  long  fail  of  falling  upon  some 
instrument  which  their  necessities  so  imperatively  re- 
quired, and  wliich  all  their  habits  of  thought  would  be  so 
likely  to  suggest. 

From  what  has  been  said,  it  is  obvious,  that  when  all 
other  methods  fail  of  adjusting  the  differences  of  ex- 
change between  two  places,  specie  must  be  procured, 
and  remitted  from  the  one  to  the  other.  This  will  al- 
ways pay  the  debt,  and  equalize  tiie  exchange.  Hence, 
the  highest  rate  of  exchange,  which,  under  natural  con- 
ditions, is  possible  between  two  countries,  is^that  which 
is  sufficient  to  procure  the  specie,  and  to  remit  it  to  the 
place  of  payment. 


OF    BANKS    OF    DISCOUNT,    OR    LOAN. 

We  have  already  seen,  that  all  production  is  the  re 
suit  of  the  application  of  industry  to  capital.  But  we 
also  see,  that  the  capital  and  the  industry  are  frequently 
in  the  hands  of  difTerent  persons.  One  has  capital,  but 
does  not  wish  to  labor  with  it  himself.  Another  has  in- 
dustry and  skill,  but  has  no  capital,  with  which  to  create 
products.  It  will  be  at  once  seen,  that  it  will  be  a  groat 
aavantage  to  both  parties,  if  the  capitalist  can  loan  his 


BANKS    OF    DISCOUNT    OR    LOAN.  233 

capital  to  the  laborer,  and  receive  from  him  a  fair  com- 
pensation ;  while  the  laborer,  by  uniting  capital  with  his 
industry,  will  be  able,  after  paying  this  compensation,  to 
retain  a  handsome  remuneration  for  himself. 

For  the  accomplishment  of  this  result,  the  introduc- 
tion of  a  circulating  medium  presents  great  facilities.  A 
flour  merchant  might  have  more  flour  than  he  wanted, 
and  would  be  willing  to  loan  it  to  another  person,  who 
wished  to  establish  himself  in  business  ;  but,  perhaps,  the 
person  who  applies  to  him  for  the  loan,  understands  noth- 
ing but  the  trade  in  iron.  The  capital  of  the  one,  there- 
fore, in  this  case,  could  be  of  no  service  to  the  other. 
But  let  the  flour  merchant  convert  his  flour  into  money, 
and  then  he  can  loan  it  to  any  one  who  needs  it,  no 
matter  what  may  be  the  occupation  in  which  he  hopes  to 
be  the  most  successful. 

As  men  accumulate  capital,  thejf  are  enabled  thus  to 
loan.  There  are  always  multitudes  of  persons  who  wish 
to  borrow.  But, he  who  is  willing  to  loan,  is  also  fre- 
quently engaged  in  active  business,  and  can  rarely  take 
pains  to  ascertain  the  character  of  the  borrower  ;  neither 
may  he  have  an)  means  of  so  observing  his  alTairs,  as  to 
secure  himself,  in  season,  against  the  results  of  dishones- 
ty. Hence,  his  risk  of  loss  would  be  great  ;  the  rate  of 
interest  high  ;  the  time  requisite  to  efiect  and  to  watch 
over  loans,  great  ;  and  there  would  be,  on  the  part  of 
the  capitalist,  but  little  disposition  to  part  with  the  im- 
mediate control  of  his  means. 

Thus,  also,  if  a  mechanic  or  merchant  wished  to  bor- 
row of  a  private  capitalist,  he  would  not  know  to  whom 
to  apply  ;  much  time  would  be  lost  in  finding  a  capi- 
talist ;  and,  if  the  caj)italist  were  timid  and  suspicicuis, 
it  might  be  utterly  impossible  to  satisfy  him  that  the  se- 
curity was  sufficient,  unless  it  were  in  property  with 
which  he  was  acquainted  ;  or,  unless  the  money  were  to 
i)e  employed  in  operations  with  wliich  he  hapjiened  to 
be  conversant.  Thus,  a  great  inconvenience  would  be 
suffered,  both  by  those  who  were  willing  to  lend,  and  by 
those  who  wished  to  borrow  money  ;  that  is,  capital. 

Now,  it  is  obvious,  that  these  inconveniences  would 
20* 


234  BANKS    OF    DISCOUNT    OR    LOAN. 

De  greatly  relieved,  if,  by  a  division  of  labor,  some  per- 
sons were  set  apart  for  the  express  purpose  of  loaning 
money.  In  this  case,  those  who  had  more  capital  than 
they  wished  to  employ,  would  exchange  it  for  money, 
and  place  it  in  the  hands  of  the  money  lender  ;  and 
those  who  wished  to  borrow  would  go  to  him  for  such 
accommodations  as  they  needed.  He  would  attend  to 
the  whole  business  of  loaning,  and  collecting  both  the 
principal  and  the  interest,  thus  acting  as  the  agent  of  the 
capitalist,  and  receiving  for  himself  a  fair  compensation 
for  his  expenses,  labor,  and  skill. 

In  this  manner,  banks  perform  the  service  of  bunging 
together  the  lenders  alid  borrowers,  so  that  he  w^o  has 
any  thing  to  lend,  can  lend  it,  if  there  be  any  one  who 
wishes  to  borrow  ;  and,  so  that  he  who  wishes  to  bor- 
row, can  borrow,  provided  there  be  any  one  who  wishes 
to  lend.  And  thus,  By  bringing  the  wants  of  both  parties 
to  act  upon  each  other,  eacli  has  the  advantage  of  loan- 
ing or  of  borrowing,  on  the  most  favorable  terms. 

Nor  is  this  all.  When  this  is  once  accomplished,  the 
whole  may  be  done  in  the  shortest  possible  time  ;  be- 
cause, the  greatest  part  of  the  time,  without  such  an 
arrangement,  would  be  spent  in  bringing  together  two 
mdividuals  who  could  agree  upon  the  loan  in  question. 
Hence,  a  negotiation,  which  might  otherwise  have  taken 
half  a  day  from  the  labor  of  both  parties,  may  now  be 
perfected,  in  a  very  few  minutes.  This  is  a  great  sav- 
ing of  time  and  labor,  and  contributes  greatly  to  the 
punctuality  of  the  whole  community,  which  is  a  still  fur- 
ther saving  of  time  and  capital. 

Besides,  we  have  already  shown,  that  when  a  man  de- 
votes himself  to  any  occupation,  and  to  nothing  else,  lie 
will  acquire  i  skill  which  can  never  be  attained  by  hiin 
who  only  practises  it  occasionally.  This  princi])Ie  ap- 
plies with  full  force  to  the  jiresent  case.  He  whose 
only  business  it  is  to  loan  money,  will  keep  himself,  at  all 
times,  acquainted  with  the  state  of  the  money  market  ; 
he  will  ascertain  the  character  and  resj)onsibility  of  the 
individuals  who  are  desii'ons  of  loans  ;  he  will  be  the  first 
to  ascertain  the  indications  of  their  failure,  cither  in  skill 


BANKS    OF    CIRCULATION.  235 

or  in  fidelity  ;  and  will,  ilieriTore,  be  the  best  prepared 
to  decide,  whether  it  be  necessary  to  withdraw  capital 
from  a  debtor.  This  will  be  especially  the  case,  if  there 
be  interested  in  the  management  of  the  funds  thus  collect- 
ed, several  men  engaged  in  general  monetary  o])erations, 
and  who,  therefore,  are  likely  to  collect  all  the  informa- 
tion on  these  subjects,  that  may  at  any  time  bb  afloat  in 
the  mercantile  community. 

Such  is  the  nature  of  banks,  as  offices  of  discount. 
Some  of  the  private  banks  of  Great  Britain  are  of  this 
character.  They  issue  no  notes  of  their  own,  but  mere- 
ly negotiate  the  bills  of  other  banks,  or  of  the  Bank  of 
Kngland.  Of  the  same  natur^  to  some  degree,  are 
Savings  Banks,  of  which  the  object  is,  to  collect  the 
capital  from  small  owners,  and  loan  it  out  at  interest  for 
their  benefit. 


OF    BANKS    OF    CIRCULATION    OR    ISSUE. 

If  banks  were  established  on  the  princij)les  which  we 
have  suggested,  and  if  the  depositors  and  contributors 
placed  in  the  hands  of  the  banker,  metallic  currency,  it 
is  evident,  that  the  bankers  or  bank  would  soon  collect 
a  great  part  of  the  metallic  currency  in  the  country. 
Were  this  the  case,  it  is  evident  that  they  might  do  a 
very  considerable  service  to  the  comnnmity,  by  linnish- 
ing  the  depositor  with  a  certificate  of  deposit,  which  he 
might  use  instead  of  the  money  which  he  had  deposited. 
Thus,  if  I  had  deposited  one  thousand  dollars  in  a  bank  in 
Providence,  and  wished  to  use  it  in  New  York,  if  their 
obligation  to  pay  so  much  money  to  my  order  were  in 
New  York  as  good  as  specie,  I  could  pay  a  debt  in  the 
latter  place  by  making  over  this  obligation  to  my  creditor 
there,  as  well  as  by  transmitting  the  specie.  If  a  mer- 
chant in  New  York,  who  owed  the  same  sum  in  Provi- 
dence, pursued  the  same  course,  one  draft  would  bal- 
ance the  other,  and  both  debts  would  be  paid.  Again  • 
The  bank,  upon  sufficient  security,  might  loan  to  me  its 


236  BANKS    OF    CIRCULATION. 

obligation  to  pay  on  demand,  and  allow  me  to  use  this 
obligation  in  any  place  where  it  might  be  for  my  mterest 
to  do  so.  And  still  more  readily  might  this  be  done,  if 
a  number  of  individtials  had  deposited  in  the  bank  spe- 
cie, for  the  purpose  of  having  it  loaned,  at  stated  rates, 
to  any  persons  who  could  offer  a  reasonable  guaranty 
that  whatever  was  borrowed  would  be,  at  an  appointed 
time,  refunded.  It  is  always  *.o  be  understood,  that  the 
bank  obliges  itself  in  all  cases,  to  pay  these  obligations 
to  the  bearer  on  demand,  in  the  precious  metals  ;  and 
that  hence,  these  notes  represent  invariably  the  value  in 
the  precious  metals,  which  their  obligation  designates. 
And  thus,  from  the  i1?iture  of  the  case,  a  large  amount 
of  the  money  in  circulation,  would  soon  become  specie 
certificates,  or  notes  of  obligation  of  the  bank.  And 
they  would  get  rapidly  into  circulation,  because  of  their 
greater  convenience  for  transportation  ;  their  diminished 
liability  to  robbery  ;  and  the  greater  ease  with  which 
ihey  could  be  identified  in  case  they  were  stolen. 

But  still  further.  It  is  manifest,  that  many  of  these 
bills  thus  issued  b}'  banks,  in  this  condition,  would  never 
need  to  be  repaid  in  specie,  but  would  be  cancelled  by 
an  equal  amount  of  similar  bills  from  other  banks. 
Again  :  Of  those  for  which  specie  was  demanded,  it  is 
impossible  that  it  should  all  be  demanded  at  the  same 
instant.  And  yet  more  :  As  some  persons  were  receiv- 
ing payments  in  specie,  other  persons  would  also  be  de- 
positing specie,  which  would  make  good  the  deficiency 
;vhich  this  withdrawal  occasioned.  Hence,  from  these 
causes  combined,  it  is  evident  that  a  bank  thus  constitut- 
ed, might,  without  violating  its  engagement  to  pay  every 
certificate  or  bill  in  specie,  issue  a  larger  amount  of  such 
obligations,  than  it  at  any  time  contained  of  specie  in  its 
vaults.  And,  inasmuch  as  it  redeemed  every  such  note 
on  demand,  with  the  precious  metals,  these  notes  would 
have,  in  exchange,  the  same  value  as  the  precious  met- 
als, everywhere  in  the  immediate  vicinity  of  the  bank  ; 
and  they  might  have  the  same  value  in  other  places,  if 
this  bank  were  in  correspondence  with  other  banks  of 
the  same  character,  in  the  difl^erent  places  with  which 
its  customers  transacted  business. 


BANKS    IN    THE    UNITED     STATES.  237 

Inasiiuicli  as  these  notes  possess  some  cons'xlerable 
advantages  over  specie  ;  that  is,  as  they  are  lighter,  oc- 
cupy less  bulk,  and  are  equal  in  exchangeable  value  to 
specie,  they  would  be  coini  lonly  preferred.  That  they 
are  so  preferred,  every  ont:  proves,  every  day,  by  his 
own  conduct.  When  we  take  a  check  to  the  bank,  and 
can  receive  for  it,  either  notes  of  the  bank  or  specie,  we 
rarely  take  the  s})ecie,  except  in  such  quantities  as  may 
be  required  for  small  exchanges.  From  these  reasons 
it  is  manifest,  that  under  such  circumstances,  a  portion 
of  the  currency  in  a  country,  when  banks  were  estab- 
lished which  had  the  confidence  of  the  community,  would 
become  paper  instead  of  metal. 

Now,  banks,  in  this  country,  and  in  Great  Britain, 
generally  perform  all  three  of  these  functions.  They 
receive  and  pay  out  money  on  deposit,  and  keep  all  the 
accounts  necessary  to  these  transactions  ;  they  loan 
money  at  interest,  and  collect  money  so  loaned  ;  and 
they  also  issue  their  own  promissory  notes,  payable  in 
specie,  on  demand. 

We  shall  close  this  section,  by  a  brief  notice  of  the 
maimer  in  which  banks  are  created  n  this  country,  and 
a  statement  of  their  sources  of  profit. 

Ban.ks,  in  this  country,  are  commonly  chartered  in- 
corporations ;  that  is,  the  privilege  of  banking  is  con- 
ferred on  several  associated  individuals,  by  a  special  act 
of  legislation.  By  these  acts,  banking  companies  are 
entitled  to  certain  privileges,  are  subject  to  certain 
forms  of  legislative  inspection,  and  are  restricted,  in 
their  operations,  within  such  limits  as  the  wisdom  of  the 
legislature  may  see  fit  to  impose.  These  privileges  gen- 
erally refer  eitiier  to  the  mode  of  collecting  their  debts; 
or  to  the  limit  of  the  liability  of  the  individuals,  m  case 
of  failure  ;  or  to  the  power  of  issuing  bills  on  demand. 
And  the  restrictions  limit  the  amount  of  their  circula- 
tion, in  i)roportion  to  their  actual  capital,  or  their  s])ecie 
in  actual  possession. 

When  any  number  of  persons  desire  to  be  incorporat- 
ed as  a  banking  company,  they  present  a  petition  to  the 
legislature  of  the  State  in  which  they  reside,  praying  for 


233  SECURITY    OF    BANKS. 

such  privilege.  If  the  prayer  be  granted,  they  are  thns 
incorporated,  ana  the  amount  of  tlieir  capital  is  limited 
in  the  act.  This  sum  is  divided  into  shares,  or  equal 
portions,  of  such  amount  as  may  be  supposed  best  suit- 
ed to  answer  the  wants  of  th?  coinmunity.  At  a  giveu 
tune  and  place,  publicly  notified,  books  are  opened  for 
subscription  ;  that  is,  every  one  is  allowed  to  subscribe 
for  as  many  shares  as  he  wishes.  The  subscribers  are 
called  stockkoiders^  and  the  shares  are  commonly,  in 
mercantile  language,  called  stock.  When  the  necessary 
amount  has  been  subscribed  the  stockholders  meet,  and 
choose,  from  their  number,  certain  persons  to  conduct 
the  operations  of  the  bank,  who  are  called  Directors. 
These  directors  then  choose,  from  their  own  number,  a 
President^  and  some  oerson,  not  of  their  number,  as 
Cashier.  On  these  two  last  mentioned  persons,  the  ac- 
tive duties  of  conducting  the  affairs  of  tne  bank  depend  ; 
though  the  directors  meet,  at  stated  times,  for  the  pur- 
poses of  general  consultation,  and  especially  to  decide 
upon  the  commercial  character  of  those,  to  whom  they 
are  requested  to  loan  their  money. 

The  bank  is  thus  organized.  The  subscribers  are 
now  required  to  pay  to  the  cashier  the  sums  which  they 
have  subscribed  for  ;  that  is,  that  portion  of  the  amount, 
which  each  has  agreed  to  invest  in  the  general  business 
of  the  brink.  Suppose  the  capital  were  one  hundred 
thousand  dollars,  and  each  share  were  one  hundred  dol- 
lars, there  would  then  be  one  thousand  shares,  and  might 
be  one  thousand  stockholders.  As  soon  as  each  one 
had  paid  the  portion  for  which  he  had  subscribed,  one 
hundred  thousand  dollars  would  be  collected  in  the  bank- 
ing house,  and  this  would  be  the  capital,  with  which  they 
would  b**  prepared  to  commence  their  banking  opera 
lions. 

The  manner  in  which  tliese  operations  are  conducted, 
IS  something  like  the  following  :  The  bank  loans  its  own 
bills,  payable  in  specie,  to  those  who  wish  to  borrow, 
and  receives  the  notes  of  individuals,  of  eipial  amount, 
in  return,  and  charges  them  interest,  which  is  paid  in  ad- 
va'.ico.      The  payir3nt  of  these  notes  is  always  guaran- 


SECURITY    OF    BANKS.  239 

tied  by  some  other  person  or  persons,  called  endorsers. 
Tiie  ordinary  period  of  loan,  is  thirty  or  sixty  days  ;  al 
the  close  of  which  time,  ihe  notes  are  required  to  be 
paid,  either  in  whole,  or  in  part,  at  the  discretion  of  the 
directors.  Hence,  if  it  were  necessary,  the  whole  af- 
fairs of  the  bank  might  be  closed  ;  that  is,  all  its  bills 
might  be  called  in,  and  all  the  notes  it  has  received 
might  be  given  up,  and  the  bank  remain  as  it  was  when 
it  commenced,  with  the  addition  of  whatever  interest  it 
might  have  acquired,  in  thirty  or  sixty  days. 

Suppose,  now,  the  capital  of  the  bank  were  all  paid 
in,  in  sueoie,  and  that  it  issued  notes  only  to  the  precise 
amount  of  its  capital.  In  this  case,  there  would  be  a 
double  and  full  guarantee  for  the  payment  of  its  bills. 
The  fa-st  guarantee  would  be  the  sj)ecie  in  its  vaults, 
equal  to  the  amount  of  all  its  bills  in  circulation  ;  that  is, 
for  every  bill  it  issued,  there  could  be  shown  an  amount 
of  silver  or  gold,  equal  to  what  it  had  promised  to  pay. 
The  second  guarantee  would  be,  the  notes  of  the  indi- 
viduals, of  substantial  responsibility,  for  an  amount  great- 
er than  all  the  bills  whicli  the  bank  has  issued,  by  the 
interest  which  was  deducted  from  the  note  when  it  was 
received.  Thus,  suppose  the  ca[)ital  of  the  bank  to  be 
one  hundred  thousand  dollars,  and  that  this  has  all  been 
paid  in  specie.  The  bank  loans  one  hundred  thousand 
dollars  of  its  bills,  and  receives  one  hundred  thousand 
dollars'  worth  of  the  notes  of  individuals  of  sound  pecu- 
niary ability.  The  bank  is  then  liable  to  pay  one  hun- 
dred thousand  dollars,  and  it  has,  wherewith  to  pay  it, 
two  hundred  thousand  dollars  ;  that  is,  one  hundred  thou- 
sand dollars  in  specie,  and  one  hundred  thousand  dollars 
of  the  notes  of  individuals.  I  think  that  every  one 
would  be  inclined  to  say,  that  such  a  bank  was  not  only 
safe,  but  even  superfluously  safe.  If  all  the  debtors 
failed^  and  nothing  was  received  for  its  issues,  yet  its 
notes  would  be  safe  ;  for  it  would  still  have,  in  its  vaults, 
sufficient  to  meet  every  demand,  as  soon  as  j)resented, 
even  if  all  its  bills  were  presented  for  payment  at  the 
mme  instant. 

iNow,   inasmuch  as  one   perfect   security  is  as  safe  as 


240  SECURITY    OF    BANKS. 

two,  and,  as  this  security  is  more  than  perfect,  it  might 
be  diminished,  and  yet  tlie  bills  of  the  bank  be  perfectly 
safe.  Thus,  it  is  morally  certain,  that  all  the  bills  of  the 
bank  can  never  be  presented  for  payment  at  the  same 
instant.  If  this  can  never  be  the  case,  as  its  debtors 
are  continually  Jiaying  back  what  they  have*  borrowed, 
and,  as  it  has,  always,  as  much  less  to  redeem,  as  it  has 
already  redeemed,  it  is  manifest,  that,  with  something  less 
than  the  amount  of  specie  designated  by  its  notes,  it  may 
always  be  prepared  to  meet  every  demand  that  may  be 
made  upon  it.  Again  :  If  all  its  debtors  failed,  it  would 
still  have,  in  its  specie,  if  equal  to  its  bills  in  circulation, 
enough  to  redeem  all  its  issues.  But,  with  any  tolerable 
management,  its  debtors  would  not  all  fail.  It  would  be 
a  very  unusual  occurrence,  if  one  half  of  them  failed. 
The  bank  would  be  then  perfectly  secure,  if  the  propor- 
tion of  its  specie  capital,  in  actual  possession,  were  suf- 
ficient to  pay  all  deficits  which  could  arise,  from  the  fail- 
ure of  its  debtors.  Hence,  we  see,  that  the  ultimate 
security  of  a  bank  would  always  be  perfect,  if  it  always 
possessed  enough,  in  specie  capital,  to  redeem  every 
bill  as  soon  as  it  was  presented,  and  also  sufficient  to 
guaranty  the  holder,  against  any  injury  which  it  might 
suffer,  from  the  failure  of  its  customers  ;  that  is,  if  there 
existed  this  ratio  between  the  issues  of  the  bank,  and 
the  capital  in  its  vaults,  such  a  bank  would  be  of  un- 
doubted security.  Hut  ultimate  sec mity  is  not  all  that  is 
in  this  case  demanded.  The  bills  of  the  bank  must  not 
only  be  redeemed  at  some  time  or  other,  they  must  be 
redeemed  on  demand,  for  this  is  what  the  bank  promises. 
This  is  what  the  community  has  a  light  to  expect,  and 
this  is  essential  to  their  character  as  money.  Hence,  it 
must  always  maintain  its  ability  to  redeem  its  bills  in  the 
precious  metal,  whenever  they  may  be  presented. 

If  it  went  beyond  this  ratio,  and  just  in  proportion  as 
it  went  beyond  it,  there  would  be  danger  that  its  notes 
would  not  be  redeemed,  or  if  ultimately  redeemed  that 
they  would  not  be  redeemed  on  demand  ;  lience,  that 
they  would  1x3  of  imperfect  value,  or  even  be  valueless, 
and    thus,    that    the  holders  of  them  would  lose,   to  the 


SOURCES  OF  PROFITS  OF  BANKS.       241* 

full  amount  or  their  depreciation.  Thus,  we  see,  in 
general,  if  the  capital  in  specie  were  equal  to  the  circu- 
lation, though  all  the  debtors  of  the  bank  failed,  the 
holders  of  its  bills  would  lose  nothing,  but  the  stock- 
holders would  Jose  all  their  contributed  capital.  If  all 
the  specie  were  stolen,  and  the  notes  were  all  paid,  the 
holders  would  lose  nothing,  but  the  stockholders  would 
lose  all.  But  if  theie  had  been  fraud,  at  the  commence- 
ment, and  no  capital  had  been  contributed,  if  the  debtors 
of  the  bank  all  failed,  the  holders  of  the  notes  would  lose 
all,  and  the  stockholders  would  lose  nothing.  And,  in 
general,,  if  the  debtors  of  the  bank  failed,  the  holders  of 
tjie  bills  could  lose  nothing,  unless  the  deficit  thus  creat- 
ed, were  more  than  sufficient  to  consume  ail  the  actual 
capital  of  the  bank.  The  capital  of  the  bank,  is  the 
guai-anteo  for  the  payment  of  the  bills  which  the  bank 
has  issued  in  exchange  for  the  notes  of  individuals  ;  and 
hence  the  holders  of  these  bills  cannot  suffer  until  this 
capital,  and  the  proceeds  of  these  notes,  be  both  ex- 
hausted. 


OF  THE  SOURCES  OF  THE  PROFITS  OF  BANKS. 

1.  From  deposits.  As  banks  are  extensively  used 
for  this  purpose,  they  must  have  on  hand,  at  all  times,  a 
considerable  amount,  from  this  source,  lying  idle.  This 
may  be  considered  a  part  of  their  capital,  which  they 
may  use  in  their  business.  If  a  bank  have,  on  an  aver- 
age, fifty  thousand  dollars  of  deposit?,  it  may  loan  to  a 
considerable  amount  beyond  what  would  otherwise  be  in 
its  power,  because,  it  has  this  additional  amount  of  means 
wherewith  to  meet  the  demands  made  upon  it.  The 
first  source  of  profit,  is,  therefore,  interest  gained  on  de- 
posits. 

2.  From  exchanges.  As  these  are  to  be  made  be- 
tween diderent  places,  and  as  they  must  be  made  in 
drafts  or  in  specie  ;  if  two  banks,  in  different  places,  un- 
dertake to  transact  this  business  in  concert,  tbey  may 

21 


242  THE    UTILl^TY    OF    BANKS. 

greatly  facilitate  the  means  of  payroent  between  tuo  pla* 
ces.     For  this   arcommodation,  they    charge   a  percen 
tage,  varying  with  the  rate  of   the  market.      This  is  an- 
other source  of  revenue. 

3.  From  interest  on  notes  discounted  ;  that  is,  on 
its  regular  loans.  This  is  its  great  source  of  revenue. 
The  manner  of  this  has  been  already  explained. 

4.  As,  from  what  has  been  said,  it  is  evident  that  a 
bank  may  safely  loan  an  amount  of  its  notes,  greater  than 
that  of  its  capital,  the  interest  of  this  excess,  is  an  addi- 
tional source  of  revenue.  Thus,  if  a  bank  have  one 
hundred  thousand  dollars  paid  in,  and  issue  notes  to  the 
amount  of  one  hundred  and  twenty-five  thousand  dollars, 
it  receives  interest  on  twenty-five  thousand  dollars  more 
than  its  stockholders  have  deposited.  This  is  an  addi 
tion  to  its  revenue,  by  its  amount,   whatever  it  may  be. 


SECTION  II. 

THE    UTILITY    OF    BANKS. 

In  stating  the  nature  of  banks,  in  the  preceding  sec- 
tion, we  have,  to  a  considerable  extent,  unfolded  the 
principles  on  which  their  utility  depends.  Tiie  subject 
is,  however,  susceptible  of  a  more  ample  development. 
We  shall,  therefore,  pursue  it  through  the  present  section. 

We  have  shown  that  the  functions  of  banks  were  of 
three  kinds  :  First,  As  institutions  of  deposit  ;  Secondly^ 
As  institutions  of  discount  or  loan  ;  and.  Third,  As  in- 
stitutions of  circulation.  We  shall  proceed  to  consider 
their  ulilihj,  in  each  of  these  three  respects. 

1.    The  utility  of  banks  as  institutions  of  deposit. 

The  utiHty  of  banks,  in  tliis  respect,  is  derived  from 
the  saving  of  labor  and  capital.  They  save  tlie  labor 
of  transportation,  of  counting,  and  of  vigilance.  They 
save  ca|)ital,  by  enabling  the  same  capital  to  accomplish 
a  greater  amount  of  exchanges.     Of  the  manner  in  which 


UTILITY    OF    BANKS    OF    DEPOSIT.  243 

this  is  done,  T  do  not  know  tliat  any  tiling  fnr.l/er  need 
oe  said.  In  so  far  as  tliis  is  concerned,  all  that  is  ne- 
cessary to  be  done,  is,  so  to  conduct  their  arrangements 
as  to  increase  their  utility  in  the  greatest  possible  degree. 

In  so  far  as  a  bank  is  intended  for  a  place  of  deposit 
for  the  circulating  medium  of  any  particulur  community^ 
the  arrangements  which  need  be  attended  to  will  at  once 
suggest  themselves.  For  instance,  its  location  should 
be  such,  as  to  accommodate  the  greatest  nuiiiWer  of  its 
cuslomers.  Its  hours  of  business  should  be  the  same 
as  those  of  the  mercantile  community,  its  afiairs  should 
be  conducted  with  the  greatest  possible  regularity.  Mis- 
takes frequently  produce  the  same  eflect  as  fraud,  and 
they  always  present,  either  to  the  one  party  or  the  other, 
a  great  temptation  to  it.  The  physical  and  moral  secu- 
rity of  the  institution,  should  be  as  great  as  possible. 
Hence,  a  banking-house  should  possess  every  practica- 
ble security  against  fire  and  robbery  ;  and,  if  necessary, 
should  be  always  under  the  protection  of  a  guard.  Such 
is  the  case  with  the  Bank  of  England.  The  officers  of 
the  bank,  whether  chief  or  subordinate,  should  be  per- 
sons of  tried  integrity,  and  should  also  be  so  arranged,  in 
respect  to  each  other,  that  collusion  should,  if  possible, 
be  impracticable  ;  and  their  whole  afiairs  should  be  so 
under  the  inspection  of  those,  whose  interest  it  is  to  de- 
tect any  fraud,  that  dishonesty  might  be  its  difficult  as  pos- 
sible. The  chief  ofiicers  should  be  men  of  property, 
so  that  their  own  interests  would  sufier  more  than  they 
could  gain,  by  any  violation  of  faith. 

The  necessity  of  all  these  provisions  will  be  at  once 
apparent.  It  is  for  the  interests  of  the  community,  as 
well  as  of  the  bank,  that  every  one  should  transact  his 
business  by  means  of  a  bank  ;  that  is,  that  he  should  re- 
ceive and  pay  money  through  means  of  its  agency.  But, 
no  one  will  employ  this  agency,  unless  he  is  certain  that 
his  money  will  be  appropriated  as  he  directs,  and  that 
nothing  shall  be  lost,  either  by  carelessness  or  by  dis- 
honesty. 

But  banks,  as  institutions  of  deposit,  are  designed  also 
to  facilitate  the  payments  of  money  in  dijferent  places. 


244  UTILITY     OF    BANKS     OF    DEPOSIT. 

Thus,  if  two  banks,  the  one  in  Boston  and  the  other 
in  New  York,  had  perfect  confidence  in  each  other's  re- 
sources, by  drawing  upon  each  other  they  niiglu  be  of 
great  service  to  the  commercial  community.  In  such  a 
case,  the  Boston  merchant  who  wished  to  pay  a  debt  in 
New  York  might  pay  his  money  to  the  bank  in  Boston, 
and  send  by  mail  the  draft  of  that  bank  in  payment  of  hi3 
debt.  This  draft  would  be  paid  at  sight  by  the  bank  in 
New  Yoflc,  and  thus  the  debt  would  be  cancelled.  •  A 
merchant  in  New  York  having  money  to  pay  in  Bos- 
Ion,  would  take  the  same  course,  and  thus  the  one  draft 
would  pay  for  the  other.  The  same  result  would  be  ac- 
complished if  the  bank  at  either  place  purchased  drafts 
on  individuals  known  to  be  solvent,  and  sent  them  to  the 
bank  in  the  other  city  for  collection.  By  charging  a 
slight  percentage  for  the  labor  and  risk,  in  addition  to 
the  regular  rate  of  exchange,  as  it  might  happen  to  exist 
between  the  two  places,  the  banks  would  earn  a  hand 
some  profit  and  at  the  same  time  accommodate  their  cus- 
tomers. And  still  further,  if  two  banks  were  well  ac- 
quainted with  the  resources  of  each  other,  and  were 
each  confident  that  all  the  debts  of  the  other  would  be 
paid,  they  might  give  orders  on  each  other,  for  the  facil- 
itating of  exchange.  Thus  if  A  wished  to  pay  money  in 
New  York,  and  a  bank  in  Boston  were  authorized  to 
draw  on  New  York,  it  might  furnish  him  with  a  draft 
which  would  be  paid  in  New  York,  and  receive  the  dif- 
ference of  exchange  ;  and  the  same  operation  being  per- 
formed by  the  bank  in  New  York,  each  would  receive, 
at  every  transaction,  a  moderate  percentage,  and  yet 
add  greatly  to  the  convenience  of  the  community. 

On  this  account,  I  suppose  it  would  be  much  better, 
to  have  several  banks  nearly  connected,  as  the  branches 
of  a  large  bank,  than  to  have  them  isolated,  and  inde- 
pendent of  each  other.  When  banks  are,  in  some  meas- 
ure, responsible  for  each  other,  they  must  become  ac- 
quainted with  the  standing  of  each  other,  and  will,  of 
course,  be  disposed  to  check  each  other's  excessive 
transactions.  Hence,  they  will  also  be  more  likely  to 
^ive  to  each  other  everv  reasonable  credit.     When,  on 


UTILITY    OF     BANKS     OF     DISCOUNT.  245 

the  contrary,  each  one  is  entirely  isolated  from  all  the 
rest,  and  no  one  bank  either  knows,  or  has  a  right  tc 
know  the  condition  of  the  oilier  ;  each  is  naturally  fear- 
ful of  the  solvency  of  the  rest  ;  and  thus,  may  not  be 
willing  to  afford  those  facilities  of  exchange,  whicti  the 
transactions  of  commerce  require.  Hence,  tlie  price  of 
exchange  is  liable  to  rise  unnecessarily  high  ;  and,  of 
course,  an  unnecessary  expense  is  imposed  upon  the 
trading  coinnuinity.  It  is  by  means  of  its  system  of 
branches,  and  the  supervision  which  it  thus  exerted  over 
them,  that  the  late  United  States  liank  was  enabled  to 
carry  on,  so  extensively,  the  business  of  exchange,  with 
great  profit  to  itself,  and  with  great  benefit  to  the  com- 
munity. Were  L^nks,  in  general,  constructed  more 
upon  this  plan,  I  think  it  would  greatly  facilitate  the 
business  of  exchange. 

While,  however,  it  is  granted  that  banks  thus  associat- 
ed possess  great  facilities  for  conducting  the  exchanges 
which  must  be  effected  between  difl^erent  parts  of  the 
same  country,  it  is  not  to  be  denied  that  objections  may 
be  urged  against  entrusting  them  with  this  agency.  In- 
asmuch as  so  powerful  a  combination  would  have  tlie 
power  of  rendering  money  plenty  or  scarce  at  any  partic- 
ular time  and  place,  they  have  it  in  their  power  to  render 
the  rate  of  exchange  high  or  low  at  their  will.  Hence, 
they  might  monoj)olize  the  whole  business  of  exchange, 
and  regulate  it  almost  at  their  pleasure.  Were  such  an 
assodipfed  banking  powder  organized,  this,  therefore,  is 
one  oi  the  evils  which  should  be  guarded  against.  See- 
Raguet  on  Money  and  Ranking,  I3ook'2d,  Chap.  10. 

n.  The  advantages  of  banks,  as  institutions  of  dis- 
count AND    LOAN. 

1.  It  may  be  proper  to  suggest,  at  the  beginning  of 
our  remarks  on  this  head,  that  banks  add  nothing  to  the 
capital  of  a  country.  Capital  has  been  already  defined. 
It  is  either  the  material  on  which  industry  operates,  the 
instruments  with  which  it  operates,  or  the  means  of  sus- 
tentation  by  which  it  is  supported  during  the  operation. 
The  capital  of  any  country,  at  any  one  moment,  con- 
sists of  the  amount  of  these  which  it  tlien  possesses. 
21  * 


246  UTILITY    OF    BANKS     OF    DISCOUNT. 

Now,  it  is  evident,  that  the  collecting  of  this  in  one 
place,  rather  than  in  another  ;  the  loaning  of  it  to  one, 
rather  than  to  another  ;  or  the  loaning  of  it,  instead  of 
not  loaning  it  at  all  ;  or  the  manufacture  of  printed  or 
of  written  promises  to  pay  money  or  any  thing  else  ;  can 
never  increase  the  capital,  that  is,  the  wealth,  or  the 
amount  of  objects  of  desire,  possessed  by  any  country. 
A  man  is  surely  no  richer,  because  he  verbally  promises 
to  pay  me  one  hundred  dollars  ;  nor  am  I  any  the  richer 
for  his  promise.  And,  if  neither  he  nor  I  be  the  richer, 
I  see  not  who  else  can  be  the  richer  for  it.  And,  if  he 
actually  lend  me  one  hundred  dollars,  and  I  return  it  at 
the  end  of  the  week,  if  I  have  used  it  profitably,  the 
capital  of  the  country  has  taken  a  different  direction 
from  that  which  it  would  have  taken  ;  that  is,  it  has  been 
in  my  hands  instead  of  being  in  the  hands  of  some  one 
else,  but  this  is  all.  The  capital  is  the  same,  except 
that  my  industry  may  have  added  somewhat  to  it. 
Could  a  nation,  or  an  individual,  become  rich  by  the 
issue  of  promissory  notes,  no  one,  who  could  write  a 
promissory  note,  ever  need  be  poor.  But  it  is  manifest 
that  this  is  not  one  of  the  methods  by  which  the  capital 
is,  in  our  present  state,  to  be  increased.  This  subject 
is  so  obvious,  that  it  seems  really  almost  unworthy  of 
serious  consideration.  The  above  remarks,  however, 
have  been  made,  because  the  contrary  notion  has  been 
so  frequently  maintained,  and  even  so  frequently  acted 
upon,  to  the  great  detriment  of  the  commercial  jjjkerests 
of  the  community.  No  one,  who  has  the  least  practical 
acquaintance  with  the  functions  of  capital  and  of  money, 
can  candidly  reflect  upon  the  subject  for  a  moment, 
without  coming  to  a  coiTCCt  conclusion. 

2.  But  whilst  it  is  allowed  that  banks  add  nothing  to 
the  existing  capital  of  a  country,  it  is  also  true,  that  they 
are  capable  of  rendering  the  existing  capital  much  more 
productive.  In  this  manner,  the  practiciil  result  may,  to 
some  extent,  be  the  same  as  though  they  actually  in- 
creased the  capital  of  a  country.  If  one  million  of 
capital  bg  capable,  under  ordinary  circumstances,  of 
producing  two  hundred  thousand  dollars  of  annual  rev- 


NATURE     OF    CREDIT.  247 

enne  ;  and  if,  by  means  of  any  improvement  in  the  man- 
ni3r  of  its  distribution,  it  can  be  made  to  produce  three 
huiulred  thousand  dollars,  the  annual  result  is  the  same  as 
if,  under  the  previous  circumstances,  the  capital  had  been 
increased  to  a  million  and  a  half.  And,  it  is  because 
banks  have  frenuently  thus  increased  the  productiveness 
of  capital,  that  the  notion  has  arisen,  that  they  increase 
the  capital  of  a  country  itself. 

The  manner  in  which  banks  may  increase  the  pro- 
ductiveness of  capital,  will  then  be  the  subject  for  our 
present  consideration. 

Banks  mcrease  the  productiveness  of  capital,  chiefly, 
by  the  facihties  which  they  afford  for  the  extension  of 
credit.  The  nature  of  credit  is,  however,  first  to  be 
considered. 

"  Credit  is  the  term  used  to  express  the  trust  or  con- 
fidence placed  by  one  individual  in  another,  when  he  as- 
sies him  money  or  other  property  in  loan,  or  without 
stipulating  for  its  immediate  payment.  The  party  who 
lends^  is  said  to  give  credit,  and  the  party  who  borrows, 
to  obtain  credit."  * 

Banks  increase  the  facility  with  which  those  who  wi;5h 
to  lend  can  lend,  and  those  who  vvisii  to  borrow  can  bor- 
row. 

That  the  extension  of  credit,  in  every  manner  which 
can  be  rendered  consistent  with  the  safety  of  the  lender, 
must  increase  the  productiveness  of  capital,  may  be  seen 
from  the  following  considerations  : 

1.  It  is  manifest,  that  the  labor  of  man,  without  tools, 
must  be,  in  the  smallest  degree,  productive.  What  man, 
by  the  mere  labor  of  his  hands,  without  tools,  could 
ever  maintain  a  family,  or  even  maintain  himself?  With- 
out an  axe,  he  could  neither  cut  nor  cleave  wood  ;  with- 
out a  hod,  he  could  not  even  carry  mortar.  He  could 
add  but  very  little  to  productiveness,  and  hence,  his  rev- 
enue must  be  reduced  to  the  lowest  hmit.  But  give 
him  tools  ;  that  is,  capital  ;  and  the  productiveness  of 
his  labor  is  at  once  greatly  increased.     As  he  receives 

•  McCulloch. 


248  UTILITY    OF    CREDIT. 

an  equitable  share  of  this  productiveness,  his  wealth  it' 
also  increased,      'i'lms,  by  the  use  of  a  small  portion  of 
capital,  both  he,  and  the  community  ;  that  is,  every  in 
dividual,  are  rendered  richer. 

2.  But  this  is  not  all.  A  man  may  have  skill  and 
instruments,  but  he  may  not  have  the  material,  on  which 
to  exert  his  industry.  In  this  case,  his  mdustry  and  in- 
struments will  be  useless.  Thus,  a  cabinet-maker  may 
possess  both  skill  and  tools,  but  if  he  have  no  n)ahogany 
'Upon  which  to  labor,  all  his  skill  will  be  of  no  value. 
If  he  can  procure  materials,  he  can,  by  a  week's  labor, 
add  very  considerably  to  the  total  wealth,  both  of  the 
community  and  of  himself.  A  blacksmith  may  have 
skill  and  tools,  but  if  he  can  procure  neither  iron  nor 
coal,  his  skill  and  tools  ai*c  valueless.  Let  him  possess 
iron  and  coal,  and  his  industry  and  skill  will  not  only 
support  him,  but  render  the  annual  revenue  of  the  socie- 
ty much  greater.  A  merchant  may  have  skill  in  the 
business  of  exchange,  which  might  be  a  great  saving  to 
a  whole  neighborhood,  but  if  he  have  no  means  of  pro- 
curing a  stock  of  goods  with  which  to  commence  ex- 
changes, his  skill  will  add  nothing  to  the  wealth  of  the 
community.  Thus,  in  order  for  the  industry  and  skill 
of  the  community  to  operate  most  productive!}^,  it  must 
be  as  universally  as  possible  united  with  capital. 

But,  it  may  be  said,  let  all  these  operatives  labor  in 
the  employment  of  those  who  possess  capital,  until  they 
have  acquired  sufllcient  to  conunence  production  on  their 
own  account.  This,  to  a  considerable  extent,  is  al- 
ways done  ;  and,  by  this  means,  the  productiveness  of 
a  country  is  annually  increased.  It  may  be  proper, 
however,  to  show  in  what  manner,  by  a  different  arrange- 
ment, and  a  wider  dissemination  of  the  benefits  of  capi- 
tal, [)roductiveness  may  be  more  rapidly  increased. 

1.   As  to  Capitalists. 

1.  Were  this  plan  universally  adopted,  it  would  oblige 
capitalists  either  to  extend  their  business  beyond  their 
wishes,  or  else  to  leave  many  laborers  uneniployed.  If 
a  capitalist  loaned  nothing,  he  must  invest  all  his  annual 
revenue  in  the  business  of  his  o\jn  profession.     Were 


UTILITY    OP    CREDIT.  249 

he  successful,  in  this  manner,  he  would,  in  the  course  of 
years,  be  obliged  so  to  enlaign  all  his  means  of  pioduc- 
tion,  that  a  great  part  of  his  adairs  must  be  managed  by 
subordinate  agents. 

2.  'i"he  talent  for  conducting  large  transactions,  is  by 
no  means  universally  possessed.  Many  men,  who  are 
capable  of  superintending  an  establishment  of  ten  thou 
sand  dollars  per  year,  would  be  utterly  incapable  of  con- 
ducting one,  of  one  hundred  thousand  dollars  per  year. 
And,  in  general,  in  proportion  to  the  number  of  grades 
of  agency  necessary  to  the  management  of  any  concern, 
the  ratio  of  profit  diminishes. 

3".  Suppose  capitalists  always  to  employ  their  own 
capital,  the  burden  of  every  man's  business  would  in- 
crease with  his  years  ;  and  thus,  the  older  he  grew,  and, 
of  course,  the  more  unfit  for  business,  the  more  intoler- 
able would  the  pressure  of  business  become.  This  is 
unnatural.  As  a  man  advances  in  years,  and  is  less 
adapted  to  labor,  he  is  disposed  to  retire  from  it,  and  to 
seek  for  some  method  in  which,  without  active  employ- 
ment, he  may  reap  the  advantage  of  his  previous  indus- 
try and  frugality. 

II.   .^5  to  Laborers. 

1.  A  laborer  will  work  with  skill  and  success,  just  In 
proportion  to  the  personal  advantage  v\hich  he  reajis  from 
his  own  labor.  Now,  every  one  must  perceive,  that 
these  inducements  will  operate  with  more  success,  when 
he  is  laboring  upon  his  own  capital,  and  reaping  all  the 
advantages  of  his  skill,  than  when  he  is  laboring  upon 
the  capital  of  another,  and  is  j)aid  only  at  a  stipulated 
price.  A  hundred  men,  each  possessing  a  capital  of 
iwo  hundred  dollars,  allowing  each  one  to  select  his  own 
place  for  labor,  would  add  much  more  to  the  annual 
revenue  of  a  country,  than  one  hundred  men,  al  labor- 
ing in  the  same  place,  under  an  employer,  who  himself 
owned  the  whole  twenty  thousand  dollars. 

2.  Besides,  were  capital  thus  to  accumulate,  in  a  few 
hands,  it  would  confine  the  operations  of  industry  to  a 
few  places,  and  thus  materially  add  to  the  cost  of  pro- 
duction, and  diminish  the  conveniences  of  the  commu- 


250  UTILITY    OF    CREDIT. 

nity  Many  of  the  trades  require  to  be  conducted  verj' 
near  the  residence  of  the  consumer.  The  blacksmith, 
the  carpenter,  tlie  cabinet-maker,  the  shoe-maker,  the 
baker,  and  the  retail  merchant,  must  reside  in  the  midst 
of  the  community  for  whom  they  labor.  Were  capital 
always  to  be  employed  by  those  who  own  it,  it  would, 
of  necessity,  be  collected  into  large  masses,  and  the 
consumer  would  lose  a  great  deal  of  time  in  procuring 
the  product  wliich  he  needed.  The  farmer  would  be 
obliged  to  go  to  the  city  to  have  his  horse  shod  or  his 
plough  mended,  and  thus,  the  labor  of  transportation, 
and  the  consumption  of  time,  would  be  greatly  increased. 
And  it  must  be  moreover  evident,  that  inasmuch  as  the 
extension  of  credit  tends  to  afford  special  advantages  to 
the  laboring  classes,  it  is  peculiarly  adapted  to  the  gen- 
ius of  a  republican  government. 

From  these  reasons,  I  think  it  evident  that  the  pro- 
ductiveness of  a  country  must  be  greatly  increased,  by 
any  means  which  shall  enable  the  skilful  and  industrious, 
in  any  profession,  to  obtain  the  use  of  capital,  by  means 
of  whi(;h  they  may  labor  on  their  own  account,  and,  in 
any  place  which  presents  the  strongest  inducements  of 
personal  interest.  They  will  thus  i)roduce  more  abun- 
dantly, and  enrich  more  rapidly,  the  country,  as  well  as 
themselves.  And,  if  such  arrangements  can  also  be 
made,  that  those  who  loan  them  the  ca|)ital  shall  be  per- 
fectly secure,  it  will  be  a  mutual  advantage  to  the  capi 
talisi  and  to  the  laborer.  While  the  laborer  is  improving 
his  condition,  the  capitalist  is  also  enjoying,  in  security, 
the  benefit  of  his  former  industry  ;  and  thus,  without  la« 
boring  himself,  is  enjoying  all  the  advantages  of  labor. 
And,  I  believe,  that  arrangements  of  this  kind  are  com- 
monly found  to  be  more  advantageous  to  a  capitalist, 
than  a  continuance  in  active  business.  The  general 
0|»inion  of  mercantile  men,  is,  I  think,  that  merchants  in 
declining  years,  are  more  likely  to  lose,  than  to  gain,  by 
continuing  in  business  beyond  the  period  of  active  en- 
terpi'se.  The  last  ten  years  of  a  life,  have  frequently 
been  destructive  of  the  results  of  all  the  labors  of  the 
forty  previous  years. 


UTILITY    OF    BANKS    OF    DISCOUNT.  25^ 

The  same  principles  apply  to  all  persons  emj'loycd  in 
'abor  or  trade.  And  hence  we  see,  in  general,  that  it  is 
by  means  of  credit,  that  those  who  possess  more  capitah 
than  they  wish  personally  to  employ,  may,  vviihont  labor, 
derive  from  it  an  equitable  revenue  ;  and  tnat  those  who 
have  less  capital  than  they  can  profitably  employ,  may 
procure  the  use  of  such  capital  as  they  wish,  and  may 
thus  be  enabled  to  enjoy  the  full  benefit  of  their  skill  and 
mdustry.  It  is  thus  that  a  poor  man,  with  industry  and 
skill,  is  enabled,  at  once,  to  reap  all  the  advantages  of 
riches  ;  and  a  rich  man,  whose  power  of  labor  is  past, 
to  reap,  to  a  considerable  degree,  the  advantages  of  in- 
dustry and  skill.  The  benefit,  to  both  parties,  is  great 
and  mutual.  And,  it  is  manifest,  that  any  institution, 
which  contributes  to  accomplish  such  a  result,  must  be 
of  material  service  to  the  community. 

Now,  banks  are  such  institutions.  They  stand  m  an 
intermediate  j)lace,  between  capitalists  and  laborers  ;  and 
enable  both  to  derive  advantage  from  each  other. 

They  do  this,  in  the  following  ways  : 

I.  They  collect  together  capital,  which  would,  other- 
wise, be  scattered  and  useless. 

1.  This  has  been  in  part  illustrated  before.  The 
greater  the  difficulties  of  loaning,  the  less  will  always  be 
the  amount  loaned.  If  he  who  has  a  few  hundred  ilol- 
lars  to  loan,  is  obliged  to  wait  until  some  one  calls  lor  it, 
it  will  lie  for  the  greater  part  of  the  time  idle.  And  if 
he  be  obliged  to  observe  the  circumstances  of  a  debtor, 
of  whom  he  may  know  very  little,  the  time  and  labor 
thus  spent  will  frequently  be  as  valuable  as  the  interest 
he  is  to  receive.  Hence,  a  large  amount  of  ca|)ital  will 
always  remain  unproductive  ;  and,  consequently,  a  large 
amount  of  industry,  which  might  have  been  rendered 
productive  by  means  of  it,  will  languish. 

2.  But  this  is  not  all.  A  large  amount  of  capital  is 
always  in  .the  possession  of  widows,  minors,  and  aged 
persons,  who  are  unable  to  unite  with  it,  that  labor  which 
is  necessary  for  its  productiveness.  These  persons  cap 
neither  labor  with  it  themselves,  nor  are  they  capable  of 
superintending  the  loaning  of  it,  either  safely  or  profita- 


252  UTILITY    OF    BANKS    OF    DISCOUNT 

bly.  Hence,  the  fear  of  losing  all  will  deter  them  fronTi 
^loaning,  and  they  will  hoard  it,  and  live  upon  the  princi- 
pal, until  it  is  all  Sj)ent,  and  they  are  reduced  to  poverty. 
Thus,  the  property  which  might  have  been  useful  (Q 
others,  and  might  have  supported  themselves  without  any 
diminution  of  its  amount,  is  in  a  few  years  dissipated  : 
and  the  gains  of  a  previous  life,  instead  of  being  added 
to  the  capital  of  a  succeeding  generation,  are  abstracted 
from  It  forever. 

3.  There  is  always  in  every  community,  a  large  num- 
ber of  persons  engaged  in  active  industry,  whose  gains 
cannot  at  present,  and  sometimes  cannot  at  all  be  invest- 
ed in  their  employment.  Such  are  laborers,  whose  gains 
cannot  be  of  service  to  them,  until  they  have  accumu- 
lated a  considerable  sum.  A  laboring  farmer  who  saves 
from  fifty  to  one  hundred  dollars  a  year,  cannot  with  this 
buy  a  farm,  until  he  have  accumulated  the  earnings  of 
several  years.  If  he  can  invest  these  gains  as  they  ac- 
crue, and  receive  interest  for  them,  they  will  annually 
add  to  his  stock.  If  he  cannot  thus  invest  them,  they 
riiust  lie  idle,  doing  good  neither  to  himself  nor  to  any 
one  else.  The  same  is  the  case  with  mechanics,  and 
various  other  laborers. 

Besides  these,  there  is  a  very  large  class  of  the  com- 
munity whose  means  of  accumulation  cannot  be  increased 
by  the  addition  of  capital.  The  merchant  can,  by  in- 
vesting his  annual  gains  in  his  stock  in  trade,  increase 
his  sales,  and,  of  course,  his  profits.  But  how  can  the 
physician,  or  the  lawyer,  or  the  clergyman,  or  any  per- 
son who  is  paid  by  salary  do  this  .'*  Hence,  if  there  be 
not  some  means  by  whirh  these  annual  gains  ean  be  con- 
veniently collected  and  invested,  they  will  be  either  fool- 
ishly squandered  as  fast  as  they  arise,  or  they  will  be 
hoarded  without  any  annual  profit,  either  to  their  owner 
or  to  the  community. 

For  these  evils,  a  bank  provides  the  remedy.  The 
stock  of  a  bank  is  all  divitled  into  shares,  of  such  amounts 
that  they  are  within  the  purchase  of  most  j)ersons  who 
may  wish  to  invest  their  capital.  These  shares  are  al- 
ways for  sale,  at  a  price  regulated  "by  the  interest  which 


UTILITY    OF    BANKS     OF    DISCOUNT.  253 

they  annually  pay.  He  who  has  one  hundred  dollars  to 
invest,  purchases  one  hundred  dollars'  worth  of  bank 
stock.  He  receives  interest  on  diis  one  huiKlred  dollar:;, 
from  the  day  he  purchases  it,  until  the  day  on  winch 
he  sells  it  again.  When  he  has  accumulated  any  thing 
more,  he  purchases  in  like  manner.  And  thus  he  has 
a  safe  place  of  investment  for  all  his  gains,  where  they 
are  both  held  securely  and  without  any  trouble  to  him, 
and  where  they  also  pay  him  an  annual  revenue.  When 
he  wishes  to  withdraw  these  funds,  and  to  appropriate 
tliem  to  some  other  use,  he  sells  his  stock  ;  that  is,  some 
one  becomes  one  of  the  stockholders  instead  of  him- 
self; and  he  thus  receives  back  the  money  which  he 
formerly  paid  in  These  shares  are  every  day  to  be 
bouglit  and  sold  u.  the  market ;  and  hence,  he  can  gen- 
erally invest  or  w.thdraw  his  money,  any  day  in  the  year 
at  an  hour's  warning. 

On  this  account,  it  will  at  once  be  evident,  that  the 
shares  of  banks  should  be  of  such  amount  as  will  best 
accommodate  the  communities  for  whose  benefit  they 
are  specially  designed.  When  they  are  intended  for 
capitalists,  they  may  as  well  be  large  as  small.  But 
when  they  are  for  the  benefit  of  those  who  have  but 
small  amounts  to  invest  at  one  time,  they  should  be 
small.  They  will,  in  this  manner,  enable  persons  of 
small  means,  the  more  easily  to  invest ;  and,  on  account 
of  this  increased  convenience,  as  their  stock  will  be 
more  eagerly  sought  for,  it  will  bear  a  higher  price  in 
the  market. ' 

The  utility  of  banks  would  be  still  further  increased, 
if,  besides  this  mode  of  investment,  they  were  in  tlie 
habit  of  receiving  small  deposits  on  interest,  which 
might  remain  with  them,  to  be  flrawn  for  at  the  pleasure 
of  the  owner.  JNIany  persons,  having  small  amounts  of 
proj)erty  to  invest,  are  unacquainted  with  the  process 
of  buying  and  selling  bank  shares,  and  thus,  either 
spend  their  money  thoughtlessly,  or  allow  it  to  lie  idle. 
Were  banks  to  receive  all  such  sums  on  deposit,  and 
allow  for  them  a  lower  interest  than  they  charge  their 
customers,  they  might  thus  conduct  a  profitable  business 
22 


254  UTILITY    OF    BANKS     OF    DISCOUNT. 

as  the  loaners  of  money  for  the  public,  and  redeem  a 
large  amount  of  capital  from  unproductiveness.  Thw 
is  liie  practice  of  the  banks  in  Scotland. 

It  is  true,  that  this  is  accomplished,  to  a  considerable 
dsgree,  by  savings  banks.  But  these  might  still  be  very 
usef  jl  by  receiving  money  in  smaller  sums  than  those  re- 
ceived by  the  bank,  and  it  might  remain  with  them,  until 
it  became  large  enough  to  invest  in  a  bank  of  discount. 
Thus  both  institutions  might  assist  each  other  ;  and  the 
bank  of  discount  would  have  this  additional  advantage, 
that  it  could  allow  of  the  withdrawal  of  money  on  de. 
mand,  which  a  savings  bank  cannot  always  readily  do. 

In  this  manner,  banks  collect  together  the  scattered 
and  useless  portions  of  capital,  and  place  it  in  a  form  in 
which  it  may  be  conveniently  used  ;  and  they  also  col- 
lect together  that  which  would,  perhaps,  be  used,  but 
which,  without  their  assistance,  would  be  used  in  a  much 
less  convenient  manner,  both  to  the  borrower  and  the 
lender. 

II.  Let  us  now  see  in  what  manner,  after  this  capital 
has  been  thus  collected,  banks  enable  the  industrious 
classes  to  enjoy  the  benefit  of  it. 

The  most  obvious  method  in  which,  without  banks, 
the  capitalist  would  assist  the  laborer,  would  be  to  sell 
nim  goods  on  credit.  Thus,  suppose  a  mechanic  wished 
to  establish  himself  in  a  village  where  his  services  would 
connnand  a  high  remuneration  ;  he  might  purchase  of 
the  dealer  in  the  material  which  he  wanted,  as  much 
stock  as  he  wished,  at  three  or  six  months,  or  a  year's 
credit ;  and,  with  this  capital,  he  could  commence  his 
business.  By  convertmg  this  material  into  product,  and 
selling  it,  he  would  be  able  to  liquidate  the  debt ;  and  all 
the  surplus  would  be  his  own.  Or,. take  the  case  of  a 
wholesale  merchant.  Suppose  such  a  merchant  to  im- 
port into  a  large  city,  two  hundred  thousand  dollars' 
worth  of  goods.  If  he  shall  wait  for  the  individuals 
who  may  need  his  wares,  to  come  and  purchase  them, 
it  may  be  a  year  or  two  before  his  sales  are  completed 
There  may,  however,  be  fifty  retail  merchants,  of  small 
capital,  in  the   surromiding  towns,  who  are  not  able  to 


UTILITY    OF    BANKS     OF    DISCOUNT.  255 

pay  in  cash  for  bis  commodities,  but  \\bo,  if  tbey  can 
obtain  tiicni  on  credit,  will  be  able,  both  to  sell  them  to 
good  advantage  to  themselves,  and  also  to  refund  the 
money  in  three  or  six  months.  It  will  be  of  advantage 
to  both  parties,  the  one  to  sell,  and  the  other  to  buy  on 
CI  edit.  And  this  is  the  manner  in  which  very  much  of 
this  business  is  commonly  transacted. 

The  natural  limit  to  this  accommodation  is,  however, 
the  pecuniary  ability  of  the  merchant.  Were  there  no 
means  of  borrowing,  he  could  grant  but  little  facility  in 
this  manner.  Just  in  proportion  as  he  were  enabled  to 
use  the  capital  of  others,  could  he  grant  the  use  of  caj)- 
ital  to  those,  whose  only  possession  was  their  labor  and 
skill.  Thus,  goods  could  be  purchased  to  but  a  small 
amount  on  credit,  were  not  the  wholesale  merchant  able 
to  avail  himself  of  the  capital,  which,  from  the  various 
sources  that  we  have  mentioned,  is  accumulated  in  banks. 
Under  these  circumstances,  in  times  of  ordinary  caution, 
there  would  be  a  large  class  of  industrious  men  whose 
enteri)rise  would  be  greatly  crippled  from  the  want  of 
cajiital. 

But  again,  suppose  that  a  retail  merchant  or  mechanic 
can  purchase  on  credit,  it  is  frequently  better  for  him  to 
borrow  of  a  bank  in  his  own  neighborhood,  than  to  pur- 
chase on  credit  at  a  distance  from  home. 

1.  If  his  character  be  good,  the  bank,  in  the  neigh- 
borhood where  he  is  known,  will  lend  to  him  at  a  lower 
rate  than  the  merchant  in  the  city  where  he  is  not  known. 
I  speak  of  the  merchant's  lending  to  him,  because,  to 
furnish  him  capital  on  credit,  is  to  lend  to  him  that 
amount  of  capital.  The  merchant  always  so  considers  it, 
and  hence  he  always  has  his  cash  and  his  credit  prices. 

2.  To  borrow  in  this  manner  is  clearly  of  advantage 
to  the  town  in  which  he  resides.      He  in  this   manner 

.brnigs  into  profitable  use  capital  which  would  otherwise 
have  been  idle  ;  and  the  very  manner  in  which  he  uses 
it  enables  him  to  sell  at  a  cheaper  rate  to  those  of  whom 
he  has  borrowed  it. 

It  Is  in  this  manner,  therefore,  that  banks  quicken  the 
indusl'T  of  a  people.     They  first  collect  together,  and 


256  UTILITY    OF    BANKS     OF    DISCOUNT. 

render  available,  all  the  capital  of  a  country  ;  and  they 
so  use  it,  that  every  one  who  needs  it,  and  can  give  the 
requisite  assurance  that  it  will  be  well  used,  can  obtain 
it.  They  thus,  by  giving  facilities  to  the  extension  of, 
credit,  enable  every  individual  to  reap  all  the  benefits 
which  can  arise  from  his  industry,  his  skill,  and  his 
moral  character.  Without  credit,  if  he  possessed  no 
capital,  he  would  be  left  to  the  resources  of  his  simple 
industry,  or  simple  manual  labor.  In  just  so  far,  there- 
fore, as  banks  tend  to  the  extension  of  this  kind  of 
credit,  they  confer  a  benefit  upon  the  industrious. 
Thus,  every  one  may  have  the  opportunity,  so  far  as  the 
capital  of  the  country  will  allow,  to  unite  his  industry 
with  capital,  and  reap  the  resulting  advantage  ;  and,  on 
the  other  hand,  all  -the  capital  of  the  country  is'enabled 
to  be  united  with  industry,  and  thus  it  is  all  employed, 
m  some  way,  in  the  business  of  production.  The  nearer 
any  community  approaches  to  such  a  state  of  things  as 
this,  the  more  intense  will  be  its  industry,  and  the 
greater  its  productiveness. 

So  far  as  banks  confine  themselves  within  these  limits, 
they  are  advantages  to  the  community.  It  is,  however, 
but  too  manifest,  that  they  may  be  greatly  perverted 
from  these  their  legitimate  objects.  Thus,  instead  of 
lending  to  the  industrious  producer  of  small  means,  they 
may  lend  to  the  wealthy  capitalist  at  the  ordinary  rate 
of  interest,  that  he  may  loan  to  the  producer  at  exorbi- 
tant interest.  Instead  of  benefiting  the  producer,  they 
thus  allow  themselves  to  be  used  as  the  instruments  for 
fleecing  him.  Or  again,  they  may  lend  to  capitalists  for 
the  purposes  of  speculation  ;  thus  enabling  them  to  raise 
to  whatever  amount  they  please,  the  price  of  the  most 
important  necessaries  of  life.  Or  still  further,  the  banks 
ihemselves  may  become  purchasers,  and  may  buy  up, 
on  their  own  account,  the  most  valuable  staple  of  a 
country,  for  the  sake,  as  in  the  preceding  case,  of  deriv- 
ing enormous  profits  by  the  monojjoly.  When  banks 
in  consequence  of  such  transactions  become  embar- 
rassed, their  resort  is  to  a  susj)ension  of  specie  pay- 
ments.     The\  are  thus  enabled  to  keep  up  the  price  of 


UTILITY    OF    BANKS    OF    DISCOUNT.  257 

•vliatcver  they  have  to  sell,  and  to  pay  off  their  debts  in 
depreciated  currency.  And  what  is  strange,  they,  not 
imiVequently,  persuade  the  community,  that  this  course 
IS  taken  entirely  for  the  public  good.  Such  conduct 
should  always  without  fail  work  the  forfeiture  of  the 
charter  of  a  bank,  whatever  might  be  the  consequences. 
When  banks  transact  their  business  in  this  manner,  they 
become  a  nuisance.  By  sudden  exj)ansions  and  contrac- 
tions of  the  currency,  they  embarrass  and  empoverish 
the  industri(His  dealer  and  enrich  the  money  lender,  tlie 
bonds  of  duty  in  the  meantime  are  sadly  relaxed,  and 
the  moral  priMcii^^les  of  the  mercantile  community  suffer 
a  frightful   deterioration.        " 

And  still  more.  As  banks  are  permanent  corpora- 
tions, of  which  the  laws  and  resources  are  known,  they 
present  an  inducement  for  the  investment  of  foreign 
capital.  This  is  always  an  advantage  to  any  country, 
provided  the  capital  be  profitably  employed  and  not 
squandered  in  useless  investments.  Capital  will  never 
be  invested,  in  any  country,  unless  the  rate  of  interest 
in  the  country  where  it  is  invested,  is  higher  than  in  that 
from  which  it  is  sent.  In  this  case,  the  former  country 
derives  the  advantage  from  the  diflerence.  If  money 
can  be  borrowed  in  London,  at  four  per  cent.,  and  be 
used  here,  at  ten  per  cent.,  we  have  the  benefit  of  the 
use  of  the  money,  and  of  six  per  cent.,  in  addition.  In 
this  manner,  money  is  constantly  borrowed  by  a  new 
country  from  an  old,  with  great  advantage  to  both,  but 
specially  to  the  new  country. 

If  such  be  the  utility  of  banks,  in  this  point  of  view, 
it  is  of  importance  that  their  arrangements  should  be  so 
made,  as  to  loan,  on  the  most  convenient  terms,  to  those 
who  are  able  to  give  proper  securit}'.  The  mode,  in 
this  country,  is  by  receiving  a  note  of  hand,  with  approv- 
ed endorsers,  and  made  ])ayable  at  a  specified  time,  say 
at  sixty  or  ninety  days.  The  bank,  however,  allows  no 
interest  on  deposits  made  by  the  drawer  of  the  note. 
This  mode  of  transacting  business,  answers  a  very  val- 
uabl*^  purpose  ;  but,  it  may  be  questioned,  whether  its 
convenience  might  not  be  very  considerably  increased. 
22* 


258  UTILITY    OF    BANKS    OF    DISCOUNT. 

Judging  by  these  principles,  it  would  seem  thai  the 
Scottish  banks  vveie  conducted  nioie  coiieetly,  as  well 
as  more  beneficially  to  the  public,  than  any  institutions 
of  the  kind  at  present  known. 

1.  As  offices  of  deposit,  they  receive  all  sums,  not  less 
than  £10  sterling;  and,  for  such  deposits,  allow  inter- 
est. Less  sums  than  this  are  ])laced  m  the  savings 
banks,  iintil  they  become  sufficiently  large  to  be  deposit- 
od  in  a  bank.  These  deposits  are,  generally,  made  by 
persons  v;ho  labor  in  agriculture  or  manufactures.  The 
wliole  amount  thus  deposited,  is  equal  to  about  twenty- 
four  million  pounds  sterling,  or  not  far  short  of  one 
hundred  and  twenty  million  dollars.  This  large  sum  is 
thus  redeemed  from  idleness,  and  added  to  the  produc- 
tive capital  of  the  country. 

2.  They  discount  notes,  as  our  banks  do,  but  they 
have  another  mode  of  loaning,  which  is  called  cash 
credits. 

When  a  man  wishes  a  cash  credit,  he  finds  a  bonds- 
man, who  promises  to  indemnify  the  bank  for  all  that  it 
may  lose,  by  loaning  to  him  within  a  certain  sum  ;  or 
else  he  places  real  estate  in  the  power  of  the  bank,  to  a 
sufficient  amount  to  render  it  secure  within  the  sum 
which  he  wishes  to  borrow.  The  bank  then  opens  with 
him  a  cash  account,  or  allows  him  to  draw  for  any  sum 
within  the  specified  amount.  He  is  charged  interest 
only  for  the  amount  which  he  borrows.  As  fast  as  he  is 
in  funds,  he  deposits  all  he  can  spare,  in  the  bank,  and 
for  every  thing  thus  deposited,  he  is  allowed  interest ;  so 
that  his  interest  on  deposits  always  diminishes  the  inter- 
est on  his  debt.  Thus  he  borrows  and  pays,  succes- 
sively ;  and,  at  stated  seasons,  the  accounts  are  ad- 
justed. 

The  advantages  of  this  system,  are  :  1st.  That  it 
enables  an  industrious  man  to  procure  credit  to  the 
amount  of  his  real  estate,  and,  hence,  to  do  more  busi- 
ness with  the  same  capital,  than  anywiiere  else.  2d. 
That  by  rendering  every  dej)osit  valuable,  it  stimulates 
him  to  frugality.  3d.  It  enables  the  bank  to  understand, 
more  correctly,  the  slate  of  his  affairs,  and,  hence,  to 


UTILITY    OP    BANKS    OF    CIRCULATION.  259 

know  how  deserving  he  is  of  confidence.  4th.  That 
this  may  be  done  with  greater  safety,  than  in  any  other 
mode,  is  evident  from  the  fact,  that  while  the  Scottish 
banks  have  been  hbcral  in  tlieir  acconnnodations,  and 
iiave,  by  the  acknowledgment  of  all,  been  of  the  most 
in)|)orlant  service  to  that  conntry.  only  one  of  them  has 
ever  been  known  to  fail.  These  are,  surely,  the  best 
evidences  of  the  wisdom  of  any  practical  system. 

Snch,  I  suppose,  to  be  the  advantages  of  banks,  as  in- 
stitutions of  discount  or  loan. 

Il[.  On  the  ulillli,  of  Bunks,  as  institutions  of  cir- 
culation. 

I  have  already  shown,  in  what  manner  it  is  possible 
for  banks  to  issue  notes  for  a  larger  amount  than  they  at 
any  moment  actually  possess  in  specie,  and  that  they 
may  do  so,  to  a  certain  extent,  with  entire  safety  to  the 
community.  Should  banks  be  generally  established, 
and  all  of  them  adopt  this  system,  as  they  would  natu- 
rally do,  it  is  evident  that  there  would  be  in  circulation, 
more  paper  than  specie  ;  that  is,  that  the  actual  circula- 
tion would,  to  a  great  extent,  be(iome  paper,  instead  of 
the  precious  metals. 

But  I  have  already  shown,  that  a  community,  in  any 
given  condition  of  exchanges,  requires  no  more  than  a 
given  value  of  the  circulating  medium,  for  its  exchanges. 
If  the  amount  be  increased,  its  value  will  diminish,  and 
vice  versa.  If  it  need  an  amount  equal  to  a  million  bush- 
els of  wheat,  no  more  than  this  can  be  employed,  and  if 
more  be  introduced,  its  value  will  fall,  till  it  become 
equal  to  a  million  bushels  of  wheat. 

Now,  by  issuing  paper  money,  the  whole  amount  of 
money  is  increased,  and,  hence,  its  price  falls.  But,  as 
ever)  paper  dollar  is  redeemable  in  silver.  Its  value  is 
still  equal  to  that  of  a  silver  dollar.  Hence,  the  whole 
amount  of  currency,  silver  and  paper  together,  ilalls  in 
price,  so  that  money  becomes  cheap,  and  you  can  buy 
more  abroad  with  a  silver  dollar,  than  you  can  buy  with 
a  silver  dollar,  at  home.  Now,  in  this  state  of  things, 
if  the  paper  and  coin  were  equaHy  valuable  in  foreign 
countries,  either  would  be  exported,  at  pleasure.      But. 


260  UTILITY    OF    BANKS    OF    CIRCULATION. 

inasmuch  as  only  the  metal  is  valuable  abroad,  this,  ex* 
clusively,  is  sent  out  of  the  country,  in  the  purchase  of 
otiier  articles.  And,  it  will  be  sent  out,  until  the  price 
of  the  circulating  medium  at  home,  is  reduced  to  its  or-, 
dinary  price  in  other  countries. 

Suppose  that  two  thirds  could  be  thus  sent  away  with- 
out impairing  the  soundness  of  the  currency  at  home. 
Business  would  then  go  on  as  securely,  and  as  well,  as 
it  d'd  before.  But,  these  two  thirds  would  procure  in 
exchange  an  equal  amount  of  other  capital,  by  which  the 
wealth  of  the  country  is  by  so  much  increased.  In  the 
mean  time,  al  the  exchanges  of  the  country  are  carried 
on  by  means  of  the  remaining  one  third,  plus  the  ex- 
pense of  the  manufacture  and  management  of  the  cheaper 
commodity,  paper;  that  is,  the  given  operation,  ex- 
change, is  carried  on  by  means  of  an  instrument,  which 
costs  only  about  one  third  of  the  expense,  which  the 
former  instrument  cost. 

This,  then,  is  the  advantage  of  banks  of  circulation. 
They  furnish  to  the  community  a  cheaper  article  of  ex- 
change. And  the  extent  of  the  benefit  is  easily  estimat- 
ed. If  the  whole  of  the  metallic  circulating  medium 
were  exchanged  for  paper,  we  should  have  the  benefit 
of  the  interest  of  this  whole  amount.  If  twenty  millions 
of  specie  were  wanted  to  carry  on  the  exchanges  of  this 
country,  and  the  whole  were  exchanged  for  paper,  we 
should  be  benefited  to  the  amount  of  the  annual  interest 
of  twenty  millions,  or,  at  six  per  cent.,  of  one  million 
two  hundred  thousand  dollars  per  annum.  If  three 
fourths  of  it  were  sent  away,  our  benefit  would  be  equal 
to  nine  hundred  thousand  dollars  per  annum.  This  is 
the  whole  pecuniary  advantage  of  a  paper  currency,  over 
a  metallic.  It  consists  in  substituting  a  cheaper  for  a 
dearer  circulating  medium.  And,  our  annual  advantage, 
supposing  the  cheaper  to  be  equally  good,  is  precisely 
equal  to  the  interest  of  the  difference. 

This  deserves  to  be  seriously  considered.  Banks  do 
not  create  capital.  The  issuing  of  paper  money,  does 
not  render  money  abundant.  \i  it  be  issued  to  such  an 
extent,  that  its  soundr^ess  is  doubted,  it  produces  an  ef- 


PAPER    AND    SPECIE    CIRCULATION.  261 

fei't  precisely  the  reverse.  If,  wliile  it  is  perfectly 
souiKJ,  it  be  issued  to  an  aiiiouiU  beyond  tlie  wants  of  the 
coniuuinity,  specie  will  be  exported,  until  the  ecpjiiibrium 
is  restored.  If  but  twenty  millions  of  value  be  needed 
in  exchange,  you  can  employ  but  the  value  of  twenty 
millions.  The  only  benefit  of  a  paper  currency,  sup- 
posing it  to  be  perfectly  sound,  over  a  metallic  currency, 
is  first^  its  greater  convenience  in  exchange  ;  and,  sec' 
ondlyy  that  it  enables  us  to  use  a  cheaper  instrument  in- 
stead of  a  dearer,  and  to  employ  the  ainount  of  the  dif- 
ference in  the  various  operations  of  human  industry. 


SECTION  III. 

ADVANTAGES    AND    DISADVANTAGES    OF    A    PAPER 
CIRCULATION. 

Having  thus  endeavored  to  illustrate  the  nature  of  a 
paper  circulation,  it  may  be  of  some  importance  to  ex- 
plain, in  as  simple  a  form  as  possible,  the  advantages  and 
disadvantages  which  appertain  to  it. 

1.  The  advantages  of  a  paper  circulation.  These  are 
two,  economy  and  convenience 

I.   Economy. 

1 .  The  material  in  use,  in  a  paper  circulation,  as  we 
have  shown,  is  of  much  less  value  than  that  in  a  sj)ecie 
circulation.  A  bill  worth  one  thousand  ounces  of  silver, 
may  not  cost  more  than  two  or  three  cents.  Now,  in 
just  so  far  as  a  paper  circulation  accomplishes  the  same 
result  as  specie,  and  accomplishes  it  at  a  less  price,  the 
community  is  the  gainer  by  the  difference. 

2.  The  wear  and  tear  of  paper  money,  as  well  as  the 
original  cost,  is  less  expensive  than  that  of  silver  .nd 
gold.  Were  silver  and  gold  transported,  as  paper  mon- 
ey now  is,  the  friction  would  reduce  the  weight  of  coin 
so  rapidly,  that  new  emissionf  would  be  much  more 
frequently  necessary. 


262      PAPER  4ND  SPECIE  CIRCULATION. 

3.  But,  specially,  as  the  introHuclion  of  paper  mone^; 
renders  a  considerable  part  of  tiie  specie  formerly  em- 
ployed, useless,  it  may  be  exchanged  for  other  capital. 
Specie  is,  in  itself,  incapable  of  production.  If  a  part 
of  it  will  answer  the  purposes  of  exchange,  all  the  re- 
mainder may  be  changed  for  productive  capital.  Hence, 
the  gain,  as  has  been  shown  in  the  preceding  section,  is 
equal  to  the  amount  of  this  difference  employed  in  pro- 
ductive, and  the  same  amount  employed  in  unproductive 
capital.  If  five  -millions  can  be,  without  injury,  dis- 
pensed with,  the  benefit  is  equal  to  the  difference  be- 
tween five  millions  in  productive  and  five  millions  in  un- 
productive capital. 

II.    Convenience. 

1.  Paper  money  is  much  more  easily  transported. 
To  travellers,  and  men  in  the  ordinary  affairs  of  life, 
this  is  a  matter  of  considerable  consequence.  Specie 
is  heavy  and  burdensome.  Any  amount  of  paper  money 
which  a  man  needs,  may  be  comprised  in  as  small  a  bulk 
as  he  chooses.  When  large  transfers  of  money  are  to 
be  made  between  distant  places,  the  additional  conven- 
ience and  security  are  still  more  evident. 

2.  Paper  money  is  less  lial)le  to  robbery.  As  we 
can  render  its  bulk  whatever  we  please,  it  can  be  more 
readily  concealed,  if  we  doubt  the  honesty  of  our  asso- 
ciates. Specie  is  heavy,  bulky,  and  noisy,  and,  hence, 
its  presence  is  unavoidably  discovered. 

3.  Paper  money,  if  stolen,  is  more  easily  identified, 
and,  hence,  more  easily  recovered.  A  man,  by  noting 
the  number  and  marks  of  a  bank  bill,  may  safely  swear 
to  its  identity  ;  but,  inasmuch  as  coin  is  intentionally  all 
alike,  this  would  be  impossible  in  the  case  of  specie.* 

These  are  the  principal  advantages,  so  far  as  I  can 
see,  of  a  paper  currency.  If  there  be  any  others,  I 
have  not  been  able  to  discover  them. 

On  tin;  other  hand,  its  disadvantages  are  three,  viz: 
Its  liability  to  forgery^  to  frauds  and  to  Jlucluation, 

*  Tlio  incoiivonionoos  lirrp  spokon  f)f,  apply  rliiofly  to  silvor.  Gold 
reprosciils  sf)  liirirc  n  valin?  that  in  any  moderate  amount  it  may  be, 

willuiul  (iilliciilty,  Iriinspirted, 


PAPER  AND  SPECIE  CIRCULATION.      263 

I.  It  is  liable  to  forgery.  The  risk,  in  this  respect, 
from  the  use  of  bank  |)a[)er,  is  considerable.  The  se- 
curity from  signatures  is  small,  since  good  penmen,  by 
practice,  can  easily  learn  to  imilate  any  signature.  The 
principal  security  arises  from  the  quality  of  the  engraving 
and  of  the  paper.  But,  as  any  one,  who  can  engrave 
sufficiently  well,  can  so  engrave  a  false  bill,  that  no  ordi- 
nary examiner  can  distinguish  it  from  a  true  one  ;  every 
man  is  liable  to  be  imposed  upon,  and  to  suffer  a  total 
loss,  to  the  exact  amount  of  the  imposition.  It  is  true, 
that  coin  is  also  liable  to  be  falsified  ;  but,  the  process  is 
much  more  difficult  and  expensive  than  that  of  engrav- 
ing. False  coin,  being  liable  to  detection  from  its  color, 
weight,  and  sonorousness,  is  more  readily  detected.  In- 
asmuch, therefore,  as  the  liability  to  counterfeiting,  is 
greater  in  paper  money  than  in  specie,  this  difference  is 
to  be  set  down  in  the  list  of  the  disadvantages  with  which 
it  is  chargeable. 

On  this  account,  banks  which  issue  paper  money,  are 
under  obligations  to  take  every  precaution  to  render  their 
bills  as  little  liable  to  be  counterfeited,  as  possible.  The 
greatest  security,  as  we  have  remarked,  is  in  the  excel- 
lence of  the  engraving,  and  in  the  peculiarity  of  the  pa- 
per. Hence,  they  should  employ,  for  the  engraving  of 
their  bills,  none  but  the  best  artists  ;  and  thus  employ 
talent,  which  would  be  under  no  temptation  to  engage  in 
counterfeiting.  They  should  never  use  plates  which 
have  been  so  much  worn,  as  to  render  the  impression 
coarse,  indistinct,  and  easily  imitated.  A  bank  which, 
to  save  expense,  uses  a  worn-out  plate,  enriches  itself,  at 
the  expense  of  the  public.  I  see  no  reason  why  a  bank, 
which  issues  bills  of  this  description,  and  thus  takes  no 
pains  to  secure  the  public  against  fraud,  should  not  be 
liable  to  pay  the  false,  as  well  as  the  true  bills.  Were 
this  done,  more  care  would  be  used,  and  counterfeiting 
would  become  far  less  common. 

II.  Fraud.  I  have  elsewhere  shown,  that  if  the 
capital  of  a  bank  be  all  paid  in,  and  the  notes  which  it 
holds  against  individuals,  and  which  it  has  received  m 
exchange  for  its  bills,  be  all  good,  the  holder  of  its  bills 


264  PAPER    AND    SPECIE    CIRCULATION. 

has  ivvo  perfectly  good  securities.  \Yere  all  the  capital 
stolen,  he  would  be  safe  ;  and,  were  all  the  notes  bad, 
the  capital  remaining,  he  would  still  be  safe.  We  have 
also  shown,  that  he  would  always  be  safe,  so  long  as  the 
capital  actually  paid  in,  was  sufficient  to  cover  any  defi- 
ciency which  might  arise  from  a  failure  of  the  debtors 
of  the  bank.  And  in  the  worst  event,  supposing  no 
loans  to  be  made  for  a  longer  period  than  GO  days,  the 
holder  of  the  bill  could  not  be  obliged  to  wait  at  furthest 
longer  than  that  time.  And,  with  ordinary  skill  and  fidel- 
ity, it  is  manifest,  that  the  issues  of  a  bank  may  always 
be  kept  within  this  limit,  and  thus  the  holder  of  its  bills 
incur  no  risk. 

But  neither  the  skill  nor  the  fidelity  of  man  is  always 
to  be  trusted.  Hence,  banks  frequently  fail,  and  in- 
flict either  a  partial  or  a  total  loss  upon  the  community. 

1.  Banks  may  fraudulently  commence  issues,  when 
only  a  part^  or  when  not  even  any  part,  of  their  capital 
has  been  paid  in.  Suppose  that  only  a  part  of  their  cap- 
ital be  paid  in;  then  the  public,  instead  of  having  a  guar- 
antee equal  to  the  whole  amount  of  its  capital,  over  and 
above  the  notes  of  individuals  held  by  the  bank,  has  a 
guarantee  equal  only  to  the  amount  of  the  part  paid  in. 
If  the  capital  of  a  bank  be  one  hundred  thousand  dollars, 
and  only  ten  thousand  dollars  be  paid  in,  and  the  bank 
issue  one  hundred  and  fifty  thousand  dollars  in  bills,  it 
possesses  only  a  guarantee  of  ten  thousand  dollars,  to 
ensure  the  payment  of  one  hundred  and  fifty  thousand 
dollars  by  the  debtors  of  the  bank.  Upon  the  least 
commercial  pressure,  or  in  case  of  loss  by  accident  or 
robbery,  such  a  bank  must  fail,  and  the  holders  of  the 
bills  must  sufl'er  a  loss  equal  to  the  deficienc)  by  the 
failure  of  the  debtors  of  the  bank,  the  costs  of  closing  its 
concerns,  and  the  loss  of  interest  until  its  bills  have  been 
paid. 

Again:  Suppose  that  none  of  the  capital  stock  were 
paid  in,  but  that  the  stockholders  simply  gave  their 
notes  for  their  shares.  The  security  would  then  be 
precisely  equal  to  the  average  goodness  of  the  notes  of 
individuals   received   by  the  bank,  in  exchange    for  its 


PAPER    AND    SPECIE    CIRCULATION.  265 

bills.  It  would  have  no  capital  on  hand  to  redeem 
(hese  bills,  and,  on  the  least  pressure  for  specie  pay- 
ments, it  must  (ail.  The  notes  of  individuals  in  a  time 
of  scarcity  of  money  would  be  worth  much  less  than  par; 
and,  as  the  stockholders  would  pay  for  their  notes  which 
ihey  gave  for  shares,  by  surrendering  up  the  shares  for 
ivhich  they  gave  them,  the  whole  loss  would  fall  on  the 
n(dders  of  the  bdls. 

Agpin  :  Suppose  that,  as  in  the  last  case,  no  stock 
were  paid  in  ;  that  the  stockholders  were  the  directors 
themselves,  and  that  they  accommodated  themselves 
with  money  without  ever  requiring  notes  of  eacii  other. 
Here,  there  would  be  no  security  whatever,  either  in 
bank  capital,  or  in  the  notes  of  individuals.  In  such  case, 
the  bank  must  speedily  stop  payment,  j.nd  the  whole 
loss  of  its  issues  would  fall  upon  the  holders  of  its  bills. 
This,  as  well  as  the  last  case,  is  nodiing  more  !han  a 
fraudulent  arrangement  for  picking  the  pockets  of  the 
public,  on  an  extensive  scale.  It  is  nothing  more  nor 
less,  than  downright  swindling,  and  should  expose  a  man 
to  the  same  punishment  as  house  breaking. 

Nor  is  this  danger  merely  imaginary.  The  amount 
lost  by  the  public  from  the  failure  of  banks  is  actually 
enormous.  Mr.  Gallatin,  a  most  able  and  competent 
authority  on  this  subject,  in  his  pamphlet  on  the  curren- 
cy, has  made  the  following  statement,  which,  from  the 
character  and  accuracy  of  the  author,  is  entitled  to  full 
credit. 

"  We  have  an  account  of  one  hundred  and  sixty-five 
banks  which  have  failed  between  the  first  of  January, 
1811,  and  the  first  of  July,  1830.  The  capital  of  one 
hundred  and  twenty-nine  of  them,  "amounted  to  moie 
than  twenty-four  millions  of  dollars,  stated  as  having 
been  paid  in.  The  whole  amount  may  be  estimated  at 
nearly  thirty  millions,  and  our  list  may  not  be  complete. 
The  capital  of  the  State  banks  now  existing,  amounts  to 
about  one  hundred  and  ten  millions.  On  a  total  capital 
of  one  hundred  and  forty  millions,  the  failures  have 
amounted  to  thirty,  or  more  than  one  fifth  of  the  whole. 
Of  the  actual  loss  incui'red,  we  can  give  no  account. 
23 


266       PAPER  AND  SPECIE  CIRCULATION. 

There  are  instances  in  which  the  stockholders,  b}  paying 
for  thpir  shares  in  their  own  notes,  and  afterwards  re- 
deeming their  notes  with  the  stock  in  their  name,  suiiered 
no  loss,  and  this  loss  fell  exclusively  on  the  holders  of 
notes,  and  the  depositors.  In  many  cases,  when  the 
whole  stock  has  been  lost,  the  holders  of  notes,  never- 
liieless,  suffered  a  partial  loss.  In  the  most  favorable 
cases,  the  stockholders  lost  a  considerable  portion  of  the 
stock,  and  all  the  debts  will  be  ultimately  .paid.  But 
even  here,  there  has  been  a  heavy  loss  to  the  communi- 
ty, the  notes  having  been  generally  sold  by  the  holders 
at  depreciated  rates,  v.'hen  the  failure  .took  place.  .We 
believe  that  the  pecuniary  loss  sustained  by  government, 
on  loans  raised  during  the  suspension  of  specie  pay- 
ments, and  from  bank  failures,  exceeded  four  millions 
of  dollars."* 

Now,  when  a  currency  is  liable  to  such  results,  from 
fiaud  or  folly,  that  is,  when  skill  and  integrity  must  enter 
as  an  element  into  its  goodness,  the  risk  which  a  commu- 
nity sustains  in  the  use  of  it,  must  certainly  be  placed  in 
the  list  of  its  disadvantages. 

Nor  aie  these  evils  peculiar  to  this  country.  In  Eng- 
land, in  the  year  1793,  as  we  are  informed  by  McCul- 
loch,  one  third  of  the  country  banks  stopped  payment. 
And  we  learn  by  the  daily  newspapers,  that  the  failures 
of  private  bankers  are  matters  of  very  frecjuent  occur- 
rence. Between  the  years  1809  and  1830,  the  number 
of  commissions  of  bankruptcy,  issued  against  country 
■bankers    in   England,   was  three   hundred    and    eleven. 

*  Since  tlio  ahovo  was  written,  tlie  "  United  Slates  Rnnk  of  Penn- 
sylvania" lias  failed,  iin(t- its  shares,  of  the  par  value  of  100  dolhire, 
and  wliich  cost  the  present  hokiers,  in  many  cases,  I'J'l  dollars,  are 
sellinir  at  tlie  nominal  price  of  f)  or  (i  dollars.  They  are,  in  fact,  con- 
sidered worthless,  and  the  hills  of  the  bank  are  selling  at  GO  cents  for 
the  dollar.  Tims,  the  whole  capital  of  this  institution,  .'-i.'i  niilliona 
of  dollars,  has  in  two  or  three  years  vanished,  and  I  fear  that  neither 
seer,  nor  prophet,  nor  jury  will  ever  tell  us  wiu-re  it  has  irone  And 
lli/s  inisinaiiagi'uient  or  fraud  was  committed  by  men  whi)  were  cel- 
ebiated  as  models  of  finance,  ability,  and  disinten^sted  i)atriiitisni, 
and  in  a  city  proud  of  its  mercantile  faith.  It  is  sur(>iy  nut  remarka- 
ble if,  with  such  facts  recent  in  their  recollection,  there  dliould  ii«ise, 
II  the  minds  of  the  people,  a  serious  distrust  of  banks. 


PAPER  AND  SPECIE  CIRCULATION.       267 

"Exclusive  of  tlie  above,  many  banks  stopped  payment, 
to  the  great  injury  of  their  creditors  and  the  })iibhc, 
which  afterwards  resumed  (hem;  while  the  atl'airs  of 
some  bankruj)!  concerns  were  arranged  without  a  com- 
mission." Yet,  it  would  seem,  there  are  means  which 
may  be  devised  to  remedy  this  evil;  for  he  informs  us 
that,  "during  this  whole  period,  nof  a  single  Scottish 
bank  gave  way.'''' 

111.  Fluctuation.  In  speaking  of  a  metallic  curren- 
cy, we  had  occasion  to  remark,  that  it  was  essential  to 
the  character  of  whatever  was  used  as  money,  that  it 
be  liable,  as  little  as  possible,  to  fluctuation.  Hence, 
vegetable  products,  of  which  the  amount  created  was 
liable  to  vary  ynder  the  same  amount  of  labor,  with  the 
diiierent  productiveness  of  seasons,  could  never  be  em 
ployed  as  money.  The  reason  is  obvious.  He  who 
contracted  debts,  when  money  bore  one  ratio  to  prod- 
ucts, would  pay  them  when  it  bore  another  ratio;  and 
hence,  though  he  might  pay  the  same  nominal  amount, 
yet  he  might  pay  twice  as  much  in  value  as  he  had 
promised.  So,  also,  he  who  had  loaned  money  while 
it  bore  one  ratio,  and  received  his  payments  while  it  w?s 
at  another,  though  he  might  receive  the  same  nominal 
amount,  might  not  receive  half  the  amount  in  value 
which  he  loaned.  And  hence,  all  civilized  communi- 
ties have  denied  to  governments  the  right  of  altering,  or 
in  any  manner  interfering  with,  the  value  of  coin  ;  for  tlie 
reason  that  this  cannot  be  effected  without  causing  a 
variation  in  the  value  of  money,  and  thus  interfering 
with  private  contracts.  Were  this  allowable,  is  is  evi- 
dent that  credit  must  be  at  an  end  ;  because,  whatever 
a  contract  might  mean  to-day^  no  one  could  possibly 
predict  what  it  would  mean  to-morrow.  Hence,  all 
fluctuation  in  the  value  of  any  substance,  renders  it,  by 
the  amount  of  this  fluctuation,  unfit  for  the  purposes  of 
a  circulating  medium.  If  gold  and  silver  were  as  fluc- 
tuating in  value  as  cotton  or  wheat,  they  would,  their 
bulk  only  excepted,  be  as  unfit  for  the  purposes  of  mon- 
ey, as  these  substances  themselves. 

Now,  these  remarks  apply,  not  only  to  gold  and  fil- 


^ 


263  PAPER    AND    SPECIE    CIRCULATION. 

ver,  but  to  any  thing  which  may  be  used  as  mJney 
They  apply  to  silver,  as  much  as  to  gold,  and  to  gold 
as  much  as  to  silver.  If  either  of  these  substances  were 
liable  to  great  fluctuations  in  value,  we  should  be  oblig- 
ed to  abandon  it,  and  to  take  the  other,  if  both  of  them 
were  so  liable,  we  should  relinquish  them  bodi,  and  find 
a  better  substance.  And,  if  paper  be  used  as  the  circu- 
lating medium,  the  case  is  the  same.  By  as  much  as  il 
is  liable  to  sudden  or  to  great  fluctuation,  by  so  much  is 
it  unfit  for  the  purposes  of  money.  And,  \^hen  onco 
paper  has  supplied  the  place  of  gold  and  silver,  h  be- 
comes the  circulating  medium  as  truly  as  gold  an^  silver 
were,  whea  they  supplied  the  place  of  copper^  ov  sheep, 
or  cattle. 

Now,  the  disadvantage  to  which,  as  we  have  said, 
paper  money  is  exposed,  is,  that  it  is  liabk*  to  sudden 
and  great  fluctuations  in  value. 

The  manner  in  which  this  occurs,  is  easily  explained. 

We  have  already  shown  that,  in  order  to  accomplish 
a  given  amount  of  exchanges  in  a  community,  a  certain 
amount  of  vakie  is  necessary  ;  and  that  no  more  than 
this  amount  of  value  can  be  employed  for  this  purpose. 
If,  to  accomplish  the  exchanges  of  a  community  at  a 
given  time,  one  thousand  ounces  of  silver,  equal  to  one 
thousand  bushels  of  wheat,  are  necessary,  and  twice  this 
quantity  be  introduced,  the  value  will  remain  the  same, 
though  the  quantity  varies  ;  and  the  result  will  be,  that 
the  price  of  money,  in  relation  to  other  products,  will 
fall  one  half ;  that  is,  if  we  gave  five  dollars  for  a  hat 
before,  we  shall  give  ten  dollars  now,  and  for  other 
things  in  proportion.  And,  if  half  the  quantity  were 
removed,  the  reverse  v^ould  be  the  case  ;  that  is,  the 
price  of  money  would  be  doubled  ;  in  other  words,  if 
we  gave  five  dollars  for  a  hat,  formerly,  we  should  give 
two  dollars  and  fifty  cents  for  it  now  ;  and  so  of  other 
productions. 

If  we  bear  this  principle  in  mind,  wc  shall  easily  seo 
the  nature  of  the  fluctuations  to  which  paper  money  is 
liable.  Metallic  money  has  a  natural  price,  which  is 
BCt  liable  to  any  fluctuation  within  short  periods.      This 


PAPER  AND  SPECIE  CI RC ULATION;  ^c'  '  269 

price  depends  upon  tlievcost  oJ_  mining,  which  is  linble 
to  very  hltle  variation.  Pie  who  exchanges  a  ihousand 
bushels  of  wheal  lor  a  thousand  ounces  of  silver,  kijous 
that  it  will  cost  as  much  to  bring  an  ounce  of  silver  into 
,  the  market,  s'x  months  hence,  as  it  does  now,  and 
hence,  its  cost  being;  the  same,  it  will  bring  for  him  as 
much  of  other  products,  ^six  months  hence,  as  it  does 
now  ;  that  is,  if  this  be  the  sole  medium  of  exchange,  and 
its  value  be  not  interfered  with  by  the  use  of  some  oihei 
substance.  Now,  paper  money  has  no  such  nalund 
price  ;  but  the  quantity  of  it  in  circulation  depends,  con 
oideiabiy.  upon  the  hopes^  wishes,  and  anticipations  of 
Dien.  Hence,  the  quantity  may  vary  in  almost  any 
amount,  and,  as  the  value  of  the  whole  is  not  altered  by 
Jhe  quantity  in  use,  as  the  quantity  increases,  the  value  of 
each  portion  must  decrease  ;  and,  hence,  a  paper  dollar 
may  be  worth  twenty-five  per  cent,  more  or  less  to-day, 
than  it  was  a  month  ago,  or  than  it  will  be  a  month  to 
come.  Though  there  may  be  the  same  words  written 
u[)on  the  paper,  and  it  be  called  by  the  same  name,  yet 
it  means,  to  him  who  pays  it,  and  to  him  uho  receives 
it,  a  very  difl'erent  thing  from  what  it  did  a  month  ago. 
He  bought,  three  iDonihs  ago,  a  thousand  barrels  of 
flour,  at  ten  dollars  a  barrel,  at  three  months  crediv. 
Without  any  change  in  the  supply  or  demand  for  flour, 
he  is  not  now  able  to  sell  it  for  more  than  seven  dollars  i  '^ 
a  barrel,  while  his  notes  for  ten  thousand  dollars  must  V^^ 
be  paid  in  full. 

This   fluctuation  may  arise,  on  the  part  of  the  bank 
innocently  or  viciously  ;    from   want   of   skill  and   fore- 
thought, or  from  want  of  integrity. 

I.  Innocently.  Suppose  that,  at  a  given  period,  the 
ciiculating  medium  in  a  community  is  properly  propor- 
tioned to  the  necessities  of  exchange,  and  that  this  me- 
dimn,  though  paper,  is  perfectly  sound  ;  that  is,  that 
there  exists,  in  all  the  banks,  sufficient  specie  to  pay  all 
delts  of  the  bank,  on  demand,  in  the  precious  metals. 

Let,  now,  from  anv  cause  whatever,  the  productive- 
ness of  labor  be  greatly  increased,  so  that  a  much  larger 
amount  o'(,  annual  products  is  brought  into  market.     If  the 


270  PAPER    AND    SPECIE    CIRCULATION. 

amouni  of  money  remain  the  same,  while  the  amount  ol 
products  is  increased,  the  price  of  money  will  rise  ;  that 
is,,  every  thing  will  be  cheap.  As  soon  as  products 
beccn)e  cheap,  every  one  is  anxious  to  buy.  Merchants 
will  be  desirous  to  borrow  money,  with  which  to  buy, 
because,  when  products  are  cheap,  it  may  be  reasonably 
expected  that  the  price  will  rise  ;  and,  if  the  rise  in 
price  be  greater  than  the  interest  paid  for  money,  the 
purchaser  may  reasonably  hope  to  be  able  to  repay  what 
he  borrowed,  with  interest,  and  yet  realize  a  handsome 
profit.  Besides,  when  an  article  is  low  in  any  country, 
then  is  the  time  to  export  it  with  advantage  ;  and  this 
prospect  of  increased  advantage  will  induce  men  to  bor- 
row, in  order  to  export,  in  the  expectation  that  the  usual 
profit  will  enable  them  to  realize  far  more  than  the  inter- 
est they  have  paid  for  borrowed  capital.  In  such  a"  sea- 
son, every  one  is  desirous  of  borrowing,  anti  banks  can 
most  profitably  employ  their  capital.  They  are  called 
upon  to  loan,  to  the  utmost  extent  of  their  power,  both 
by  their  own  interest,  and  by  the  universal  wish  of  the 
public. 

Now,  in  such  a  state  of  things,  it  is  not  to  be  sup- 
posed that  the  directors  of  the  banks  are  endowed  with 
greater  prudence  than  other  men,  or  that  they  are  not  as 
likely  to  be  influenced  by  the  hope  of  large  dividends. 
The  example  of  one  stimulates  the  others.  The  risk 
that  one  institution  runs,  another  will  he  willing  to  run. 
A  bank  will  scarcely  be  willing  to  make  a  dividend  of 
six  per  cent.,  while  its  neighbor  is  making  eight.  And 
when  disconnected  banks,  all  over  a  nation,  are  animated 
by  these  principles,  it  is  evident  that  a  very  large  amount 
of  loans  must  be  eHected  ;  that  is,  a  very  large  amount 
of  paper  money  must  be  issued.  For  the  same  reason, 
at  such  a  time,  a  great  number  of  additional  banks  will 
be  incorporated,  and  all  will  be  watched  over  with  less 
than  usual  vigilance.  But  just  so  fast  as,  beyond  the 
necessary  amount,  the  quantity  is  increased,  the  value 
of  each  portion  of  it  dituinishcs,  and  thus  prices  rise  ; 
that  is,  money  becomes  abundant,  and  a  dollar  will  pur* 


>^ 


PAPER    AND    SPECIE     CIRCULATION.  271 

eliare   no    more    than   it   would    in  a   time   of  scarcity 
Tims,  the  amount  of  the  circulating   iDedium  becomes 
too  great   for   the  amount   of  exchanges,  and    money  is 
cheaper  than  any  other  article  in  the  market. 

But,  we  have  before  seen,  that  the  cheapest  article  in 
the  market  will  always  be  exported.  As  this  is  now 
money,  money  will  be  exported.  But,  as  the  bills  ar« 
redeemable  in  specie,  specie  is  worth  no  more  than 
bank  bills  ;  and,  as  the  bills  are  worth  nothing  abroad, 
the  whole  exportation  will  be  in  coin.  In  a  short  time,  a 
large  portion  of  it  has  left  the  country.  The  banks  then 
find  themselves  liable  to  pay  in  specie,  a  vastly  greater 
amount  than  they  were  liable  to  pay,  a  month  or  two 
since,  and  they  find  that  they  have  much  less  specie 
wherewith  to  pay  it  ;  and  the  demand  for  specie  still 
continues.  They  are,  of  course,  in  danger  of  stopping 
payment,  and  their  only  means  of  safety  is,  in  diminish- 
ing their  loans  ;  that  is,  loaning  no  more,  and  requiring 
payment  of  those  who  owe  them.  Hence,  those  who 
had  borrowed,  with  the  hope  of  paying  by  means  of 
their  sales,  are  called  upon  to  pay,  before  these  sales 
are  effected,  and,  as  the  banks  refuse  to  loan,  very  few 
are  disposed  to  buy.  Thus,  the  debtors  of  the  bank 
are  required  to  pay  their  debts  sooner  than  they  ex- 
pected, and  the  means  of  making  those  payments  are 
curtailed.  The  money  goes  back  into  the  bank,  and 
does  not  come  out  of  it.  Thus,  with  every  day,  the 
quantity  of  the  circulating  medium  is  diminished.  The 
scarcity  of  money  increases.  The  price  of  goods  falls, 
as  men  will  sell  for  lower  and  lower  prices,  rather  than 
lose  their  credit.  Every  man,  from  necessity,  presses 
his  neig'ibor,  and  the  bank,  from  the  same  necessity, 
presses  them  all.  And  thus,  in  a  few  months,  the 
amount  of  circulating  medium  is  greatly  diminished  ;  and 
money  is  worth  twenty-five  or  fifty  per  cent,  more  than 
it  was  a  short  time  ago.  He  wlio  agreed  to  pay  one 
thousand  ounces  of  silver,  when  one  ounce  of  silver  was 
worth  a  bushel  of  wheat,  pays  it  now.,  when  it  is  wrth 
«  bushel  and  a  half  of  wheat ;  that  is,  though  he  pay  Uie 


272      PAPER  AND  SPECIE  CIRCULATION. 

same  nominal  amount,  he  pays  fifty  per  cent,  more  lU 
value.* 

The  result  of  such  a  state  of  things  depends,  of 
course,  upon  the  degree  of  the  excess  of  these  issues. 
If  this  excess  iiave  not  been  great,  by  means  of  mutua. 
forbearance,  the  scarcity  passes  away  ;  that  is,  holders 
of  produce,  being  obliged  to  sell  or  to  fail,  sell  at  re- 
duced prices.  Thus,  the  price  of  money  rises,  and  it 
becomes  profitable  to  import  it.  It  is  then  imported  ; 
the  banks  are  thus  enabled  to  discount  ;  and  things  go 
on  again,  as  usual  ;  with,  however,  a  severe  loss  if  not 
total  ruin  to  those  who  have  purchased  when  goods  were 
at  high  prices. 

But,  it  is  not  always  thus.  Sometimes  the  pressure 
for  money  is  so  great,  that  those  who  have  purchased 
products  with  borrowed  capital,  cannot  sell  them  fast 
enough  to  make  their  payments.  These  are  obliged  to 
stop  payments,  or  become  bankrupts,  and  assign  their 
effects  to  their  creditors.  But  these  were  debtors  to 
many  others,  who  were  depending  on  the  payment  to  be 
received  from  them,  to  pay  their  own  debts.  These, 
being  disappointed  in  this  expectation,  also  fail.  .  Their 
failure  leads  again  to  the  failure  of  others,  and  the  panic 
becomes  general.  No  one  dares  to  trust  his  neighbor, 
and  the  banks  dare  not  trust  any  one.  An  universal 
crash  of  mercantile  credit  succeeds,  and  none  are  al>lo 
to  withstand  the  shock,  save  those  of  the  heaviest  capi- 
tal, and  of  the  greatest  financial  ability. 

This,  however,  at  length  works  its  own  cure.  When 
a  debtor  fails,  he  assigns  his  property  to  his  creditors  ; 
that  is,  he  pays  them  in  kind^  instead  of  in  money 
Hence,  this  being  done,  his  need  of  money  is  over,  and, 
by  so  much,  diminishes  the  demand.  His  property  is 
sold,  at  any  price  it  will  bring.  This  depresses,  still 
more  rapidly,  the  price  of  goods  ;  that  is,  raises  the 
comparative  value  of  money  ;  and  hence,  it  will  be  the 
more  readily  imported.     As  soon  as  these  causes  have 

"Tlio  banks  in  tlie  city  of  New  York  niono,  witliin  a  few  months 
lately,  reduced  their  circulation  to  the  amount  of  more  than  twelve 
iii'ilions  of  dollars. 


PAPER    AND    SPECIE    CIRCULATION.  27ll 

had  time  to  operate  ;  that  is,  diminished  demand  and 
increased  sup[)ly  ;  the  cqniiibjium  is  restored,  and  credit 
is  established  on  its  orJiiiary  basis. 

The  meliiod  which  has  been  sometimes  resorted  to, 
when  banks  have  either  viciously  or  innocently  become 
unable  to  pay  their  bills,  is  to  suspend  specie  payments, 
and  then  prevail  upon  the  State  legislatures  to  pass  lawa 
exempting  them  from  the  consequences  of  their  failure. 
This  expedient  has  been  resorted  to,  for  the  second  time 
within  two  years,  by  a  great  part  of  the  banks  in  the 
United  States.  Although  excuses  may  be  rendered  for 
such  a  course,  under  a  universal  and  unexpected  calan)- 
ity,  there  can  be  no  doubt  that  the  bank  suspensions 
must  work  the  direst  mischief  to  the  community.  With" 
out  going  into  the  subject  in  detail,  the  following  consid 
erations  are  sufficient  to  show  the  nature  and  tendencies 
of  such  a  measure. 

1.  The  obligations  of  a  bank  are  as  binding  as  those 
of  an  individual.  There  is  no  reason  why  it  sliould  be 
exonerated  from  them  more  than  an  individual.  If  a 
merchant  fail  to  pay  his  note  to  the  bank,  his  credit  is 
dishonored  and  he  is  expected  to  pay  interest  from  the 
time  of  his  failure.  There  can  be  no  reason  why  a  bank 
should  not  abide  by  the  rule  which  it  enforces  upon 
others. 

2.  The  only  circumstance  which  gives  any  value  to 
the  bills  of  a  bank  is  the  assurance,  that  they  will  be  paid 
in  specie.  But  if  the  bank  is  allowed,  at  will,  to  ab« 
solve  itself  from  this  obligation,  what  is  this  assurance 
worth.  This  very  power  conceded  to  banks  would 
lender  a  paper  currency  worthless. 

3.  The  only  restriction  upon  unlimited  issues  of  pa- 
per money  is  the  obligation  imposed  upon  banks  to  re- 
deem their  bills  at  sight  in  specie.  So  long  as  this  is 
enforced,  the  currency  could  not  readily  become  inju- 
riously expanded.  If  it  be  not  enforced,  or  if  the  bank 
may  be  easily  sheltered  from  the  results  of  its  impru- 
dence, a  paper  currency  may  be  ex[)anded  illiniitably. 
[n  this  manner,  as  in  the  case  of  the  continental  money, 
the  circulating  medium  may  be  rendered  good  foi  notl.iing 


274  PAPER     A.ND     SPECIE    CIRCULATION. 

4.  The  tenden'-y  of  frequent  suspensions  must  be  to 
drive  all  the  specie  out  of  the  country.  In  consequence 
of  over  issues,  prices  will  be  kept  so  much  above  those 
of  other  countries,  that  products  cannot  be  profitably* 
exported,  and  specie  will  immediately  take  its  place. 
Tiius,  as  soon  as  banks  resume  the  payment  of  their 
debts,  prices  being  high,  they  will  be  again  compelled  to 
suspend,  and  thus  a  {ew  such  examples  would  end  in  a 
small  number  of  spasmodic  contractions  and  suspensions, 
to  be  followed  by  a  perpetual  insolvency. 

5.  As  banks  are  at  present  managed,  in  too  many 
instances,  the  officers  of  the  banks  themselves  are  the 
principal  borrowers.  By  combination  with  each  other, 
they  may  easily  procure  loans  si.fficient  to  control  the 
price  of  any  of  the  necessaries  of  life,  within  a  largo 
district.  If,  when  their  loans  become  due,  the  borrow- 
ers were  obliged  to  make  payment,  they  must  relinquish 
their  monopoly,  and  sell  at  the  natural  prices.  But,  if, 
as  soon  as  they  were  called  upon  to  make  payment  to 
the  bank,  they  could  suspend  specie  payments,  it  is  evi- 
dent that  they  could  prolong  their  loans,  and  keep  up 
prices  at  their  will.  The  tendency  of  such  a  course  is 
manifestly  to  set  the  poor  against  the  rich  for  cause,  a 
most  barefaced  oppression. 

These  are  a  few  of  the  most  obvious  reasons  why 
banks  should  always  be  obliged  to  redeem  their  bills,  in 
specie,  and  at  sight.  If  they  fail  to  do  so,  the  legisla- 
tures should  not  shield  them,  but  should  expose  theui  to 
the  natinal  action  of  law.  A  (ew  examples  of  this  kind 
would  do  much  to  place  the  currency  upon  a  sound  basis. 

In  this  inanner,  fluctuation  may  arise  innocently.  And 
every  one  knows  that  such  fluctuations  are  constantly 
occm-ring  in  the  mercantile  world.  But  wliat  occurs 
thus  innocently,  is  liable  to  occur  vicionsly. 

IJ.  Viciously.  A  bank,  established  in  a  town  remote 
from  the  ordinary  channels  of  business,  or  the  banks  in 
any  one  place,  if  combined  together,  as  ihey  furnish  the 
paper  money  which  is  used  for  all  the  common  purposes 
of  exchange,  have,  to  a  considerable  degree,  the  nio- 
lopoly  of  the  article  in  the  market.     Hence,  by  loaning 


PA.PER    AND    SPECIE    CIRCULATION.  275 

very  freel)  at  one  time,  they  may  bring  the  whole  district 
into  their  debt.  When  this  is  the  case,  if  the)  see  tit 
to  curtail  iheir  disc(jniiis,  they  amy  reduce  the  amount 
of  circulating  medium,  and  raise  the  price  of  money  as 
much  as  they  will.  They  may  thus,  by  enforcing  pay- 
ment, render  half  the  population  bankrupt,  and  possess 
themselves  of  their  estates,  at  half  price  ;  or  else  oblige 
them  to  pay  double  or  treble  the  usual  percentage  of 
interest.  That  such  events  have  occurred,  is,  i  fcir, 
too  much  a  matter  of  history.  And  it  has  given  rise  to 
a  fre(jueiit  and  unwarrantable  prejudice  against  banks  in 
general. 

While,  however,  all  this  is  admitted,  it  deserves  to  be 
remarked  : 

1.  That  these  disadvantages  of  fluctuation,  both  from 
unskilfulness  and  from  fraud,  do  not  belong  exclusively 
to  b(mks,  but  are  liable  to  exist  under  any  circumstances, 
in  which  money  is  loaned  and  borrowed.  Were  there 
no  banks,  and  were  money  to  be  loaned  by  private  capi- 
talists, and  even  to  be  loaned  in  specie,  the  same  incon- 
veniences though  in  a  less  degree  would  be  liable  to  re- 
sult ;  for  men  are  always  tempted  to  borrow  to-day, 
more  than  they  will  be  able  to  pay  to-morrow.  And  it 
is  evident  that  collusion,  for  the  sake  of  raising  the  rate 
of  interest,  may  be  as  liable  to  occur  between  individua 
money  lenders,  as  between  banks. 

2.  The   blame,  when    such   a  state   of  things   as  ha 
been  described,   exists,   is  always  laid   upon  the  bank* 
This  is  manifestly  unjust.      It   belongs   to   the  borrower, 
just  as  much  as  it  dees  to  the  lender.      Men  are  very 
willing  to  borrow,  but  they  very  commonly  call  upon  the 
community   for    great    commiseration,    when     they    are 
obliged  to  pay.      1  by  no  means  object  to  the  extension 
of  any  commiseration  which  may  be  convenient,  but  it 
would  be  a  very  inconvenient  extension  of  it,  if  it  releas- 
ed a  man  from  the  obligation  to  refund  what  he  had  bor 
rowed,  and,  by  the  use  of  which,  he  has  already,   per- 
haps, realized  a  handsome  revenue.      'J'he  bank,  by  en- 
forcing payments  in  a  time  of  pressure,  is  really  doing  a 
great  service  to  the  community.      This  is  evident.     If 


276       PAPER  AAD  SPECIE  CIRCULATION. 

the  debts  due  to  the  banks  were  not  paid,  the  banks 
would  fail,  and  the  whole  circulating  medium  become 
worthless.  So  that,  if,  by  their  exacting  punctuality, 
some  persons  fail,  it  is  still  belter  that  a  i'ew  persons 
than  that  the  whole  community  should  be  ruined. 

3.  Again  :  In  a  time  of  scarcity,  banks  are  sadly 
abused,  because  they  will  not  loan  more  money.  A 
bank,  if  it  be  honest,  and  mean  to  pay  its  debts,  has  its 
limit,  which  it  cannot  safely  pass,  as  truly  as  an  indiviu- 
ual.  When  it  has  arrived  at  this  limit,  its  loans  must 
cease.  A  merchant  who  has  involved  himself  in  large 
transactions,  expecting  that  he  could  borrow  as  much  as 
he  chose,  is  now  disappointed,  because  his  expectations 
are  not  realized.^  But  what  reason  has  he  to  complain  ? 
The  bank  never  promised  to  lend  him,  when  it  had  noth- 
ing to  lend  ;  nor  to  ruin  itself,  for  the  sake  of  saving 
him  from  the  consequences  of  his  own  headlong  improv- 
idence ;  specially,  when  by  doing  this,  it  must  involve 
not  only  itself,  but  him  also  in  ruin.  The  bank  was  nc 
party  to  his  engagements  ;  it  derives  no  benefit  from 
them,  and  it  is  under  no  obligation  to  enable  him  to  fulfil 
them.  The  only  remedy  for  these  evils  manifestly  is, 
for  both  parties  to  be  willing  to  grow  rich  more  slowly, 
and  thus  to  assume  less  formidable  risks.  When  a  whole 
community  has  run  into  transactions  beyond  its  means, 
and  has  become  embarrassed,  there  is  very  little  gaineo 
by  the  abuse  of  banks  and  of  bank  directors. 

If  these  remarks  be  just,  there  will  follow  several  very 
obvious  conclusions. 

1.  That  to  lend  money  is  just  as  necessary  to  the 
good  of  the  community,  and  is,  therefore,  as  innocent 
and  as  honorable  as  to  borrow  it. 

2.  That  an  institution,  organized  for  the  purpose  of 
lending  money,  is,  so  far  as  its  object  is  concerned,  as 
beneficial  to  the  community,  as  innocent,  and  as  honora- 
ble as  any  oilier  institution. 

3.  That  a  lender  of  money  is  liable  to  be  dishonest 
at)d  unskilful  ;  but  that  of  a  borrower  of  money  is  also 
liable  to  be  dishonest  and  unskilful. 

4.  And   hence,  that  the  one,  as  much  as  the  other,  is 


AGENCY    OF    GOVERNMENT.  277 

etititlod  to  all  ihe  benefits  of  equal  laws,  and  the  fair  and 
unbiased  execution  of  lliein.  If  a  bank  conduct  itself 
dishonestly,  this  is  a  reason  why  it  should  be  dealt 
with  according  to  just  and  equitable  law  ;  but  it  is  not 
a  reason  why  all  the  capital  of  the  country  should  be  op- 
pressed, and  every  capitalist  insulted.  A  carpenter  may 
be  dishonest  ;  and  this  is  a  reason  why  he  sliould  be 
dealt  with  according  to  just  and  equitable  law  ;  but  it  is 
no  reason  why  every  carpenter  should  be  oppressed,  and 
his  calling  made  a  cause  of  oj)probrium.  The  princi- 
ple which  applies  to  the  one  case,  applies  equally  to  the 
other. 


SECTION   IV. 

OF  THE  AGENCY  OF  SOCIETY,  THAT  IS,  OF  GOVERN- 
MENT, IN  RESPECT  TO  A  PAPER  CIRCULATION. 

I  have  already  remarked,  when  treating  of  specie  cir- 
culation, that  coin  was  employed  as  a  circulating  medi- 
um, not  in  consequence  of  the  act  of  a  government,  or 
of  the  stamp  which  it  bore,  but  simply  in  consequence 
of  its  adaptedness  to  be  employed  for  this  purpose,  and 
of  the  universal  desire  of  the  community  so  to  employ 
it  ;  and  also,  that  the  whole  agency  of  the  government 
•is  properly  limited  to  the  making  of  those  arrangements 
which  would  enable  it  to  accomplish  this  purpose  the 
most  successfully  ;  that  what  substance  a  conmiunity 
should  employ,  is  none  of  the  concern  of  a  government  , 
its  only  concern  being,  so  to  i)repare  the  substance  em- 
ployed, that  it  may  be  used  with  the  greatest  common 
advantage. 

Now,  the  same  remarks  manifestly  apply  to  ichatever 
may  be  used  as  a  circulntins^  medium,  whether  it  be  gold 
and  silver,  or  paper.      Hence, 

1 .  A  government  has  no  right  to  interfere  with  the 
original  (piestion,  what  shall  the  currency  be  ;  this  may 
be  safely  left  to  the  decision  of  the  public  itself.  If  the 
24 


278  AGENCY    OF    GOVERNMENT 

peojile  choose  to  use  a  mixed,  instead  of  a  metallic  cur- 
rency, they  have  a  riglit  to  use  it ;  and  no  one,  either  ni- 
di vidual  or  associate(i,  lias  any  right  to  foi'bid  that  use. 
h  1  present  a  check  to  a  bank,  and  they  otier  me  in 
payment  either  specie  or  bills,  and  1  choose  to  take 
their  bills,  it  is  a  matter  wholly  of  my  own  concern.  I 
ask  j)ermission  to  make  this  choice,  of  no  one  on  earth. 
If  I  have  a  thousand  dollars  to  pay  in  New  Orleans,  and 
I  choose  to  take  the  bill  or  the  draft  of  a  bank,  and  send 
this  in  payment  instead  of  the  thousand  dollars  in  silver, 
and  my  creditor  receive  it  in  payment,  if  both  he  and  1 
are  satisfied,  I  see  not  that  any  one  has  a  right  to  in- 
terfere. 

2.  But,  although  a  community  may  choose  a  mixed, 
instead  of  a  metallic  currency,  and  although  they  have  a 
right  to  choose  it  ;  neither  any  conmiunity,  nor  any  in- 
dividual of  a  community,  chooses  either  a  worthless  or  a 
fluctuating  currency.  While,  therefore,  a  government 
has  no  right  to  enact,  that  a  currency  shall  be  any  thing 
else  than  the  people  wish  it  to  be,  they  have  a  right  to 
take  all  proper  means  to  make  it  such  as  the  people  wish 
it  to  be.     Hence, 

1.  They  have  a  right  to  take  such  means  as  will  give 
all  reasonable  security  to  a  mixed  currency.  These 
means  have  respect,  in  general,  to  the  liability  of  direc- 
tors and  stockholders  to  redeem  their  bills.  In  what 
manner  this  security  can  be  best  effected,  it  must  be  left 
to  practical  men  to  decide.  In  some  cases,  all  the. 
property  of  all  the  stockholders  is  rendered  liable  for 
the  debts  of  the  bank.  This  would  commonly  be  a  per- 
fect guarantee.  In  other  cases,  1  believe,  the  property 
only  of  the  directors  is  held  liable.  In  what  way  soever 
security  can  be  best  and  most  equitably  elFected,  I  thii  k 
a  government  has  an  undoubted  right  to  effect  it. 

2.  \  government  has  a  right  to  take  all  reasonable 
means  to  diminish  the  Jluctuation  of  a  paper  currency. 
We  have  seen  that,  inasmuch  as  the  banks  promise  to 
redeem  their  bills  in  specie,  the  amount  of  paper  which 
they  may  safely  issue  must  always  dcjXMHl  upon  the 
amount  of    specie   in   a   country.     Fluctuations   in  the 


AGENCY    OF    GOVERNMENT.  2'»  ^ 

amount  of  paper  must  follow  fluctuation  in  the  amount 
of  specie.  This  fhicluation  will  always  be  less,  when 
the  proportion  of  specie  to  paper  is  great,  and  vice  vo^sa. 
One  method,  therefore,  of  preventing  this  evil,  is,  so  to 
construct  the  currency,  that  the  proj)ortion  of  specie  to 
paper  shall  be  too  great  to  be  affected  by  any  thing  but 
large  and  long  continued  exportij^ions  of  the  pre<;ious 
metals.  This  result  may  be  in  part  eflected  by  the  pro-  | 
hibition  of  the  issue  of  small  bills.  This  will,  by  ne-  '. 
i'essity,  place  in  the  hands  of  every  individual,  specie 
for  every  amount  which  he  may  hold  of  less  value  than 
the  lowest  note  issued.  Were  no  bank  in  this  country 
to  issue  notes  of  a  less  denomination  than  five  or  ten 
dollars,  most  of  the  sums  held  by  individuals,  in  notes 
of  one,  two,  and  three  dollars,  would  be  in  silver.  If 
every  individual  of  the  twelve  millions  in  the  United 
States,  possessed  two  dollars  more  in  specie  than  at 
present,  this  would  amount  to  twenty-four  millions  more 
of  specie  than  we  now  possess.  This  would,  oi'  itself, 
be  sufficient  to  prevent  the  evil  arising  from  any  ordinary 
fluctuation. 

In  addition  to  this,  T  suppose  that  an  exact  account 
should  be  kept,  and  at  short  periods  made  public,  of  the 
amount  of  specie  imj)orted  and  exported.  This  would 
give  to  the  banks,  timely  notice  of  the  danger,  and,  at 
the  first  intimation  of  excessive  issues,  they  might  cur- 
tail their  discounts,  in  season  to  avert  the  evil  befoie  it 
became  excessive  and  remediless. 

3.  While  we  deny  the  authority  of  legislative  inter-  \ 
ference  to  oppress  banks,  we  equally  deny  its  authority 
to  protect  them  against  the  consequences  of  their  own  I 
misconduct.  A  bank  promises  to  redeem  its  notes  iji 
specie  ;  a  legislature  has  no  more  right  to  invalidate  this 
obligation  than  to  invalidate  any  other.  If  an  individual 
fail  to  discharge  his  debts,  all  his  property  is  liable  to 
satisfy  the  demands  of  his  creditor.  If  a  joint  stock 
bank  fail,  only  the  amount  of  its  contributed  capital  is 
lialile.  The  reason  is,  therefore,  stronger  why  the  latter 
should  be  amenable  to  the  common  law  of  debtor  and 
creditor  tiian  the  former. 


280  AGENCY     OF    GOVERNMENT. 

So  far  as  I  can  discover,  the  power  of  a  govornrnent 
over  a  paper  currency,  is  conferred  solely  for  the  ac- 
complishment of  these  two  objects  ;  and,  of  course,  it 
is  restricted  to  the  accomplishment  of  these  two  objects. 
A  government  has  no  right  to  interfere  with  it  for  any 
other  purpose.  It  has,  for  instance,  no  right  to  interfere 
wilh  the  currency,  because  the  people  import  too  much, 
or  because  they  import  too  little  ;  because  they  buy  too 
much  land,  or  because  they  buy  too  little  land  ;  because 
they  over-trade,  or  because  they  under-trade.  Its  pow- 
er was  conferred  for  no  such  purpose,  and  to  use  it  for 
.<5uch  purpose  is  usurpation. 

But  other  grounds  for  legislative  interference  with 
banking  institutions  are  assumed,  which,  if  correctly  as- 
sumed, are  of  a  very  extraordinary  tendency.  Some  of 
»hese,  it  may  be  proper  for  us  briefly  to  consider.  For 
instance,  it  is  said,  that  banks  are  the  creatures  of  the 
legislature  ;  and  that  bank  directors  are  the  agents  of  the 
legislature  ;  and,  therefore,  that  a  legislature  may  right- 
fully exercise  over  them  any  authority  which  it  chooses  ; 
and  may  impose  upon  them  such  laws  as  it  sees  fit.  Such 
an  assumption  as  <his,  deserves  at  least  a  passing  notice. 

1.  It  is  asserted,  that  a  bank  is  the  creature  of  the 
legislature ;  and,  therefore,  that  a  legislature  may  right- 
fully impose  uj)on  its  creature  such  laws,  and  subject  it 
to  such  jurisdiction,  as  it  pleases. 

The  assertion  is  somewhat  figurative.  What  is  meant, 
when  it  is  said  that  a  bank  is  a  creature  of  the  legisla- 
ture 9  In  what  does  a  banking  company  differ  from  a 
banking  individual'?  The  only  dilfereuce,  that  I  can 
discover,  is,  that  one  ii  incorporated  by  a  legislative  actj 
I  he  other  is  not. 

What,  then,  is  an  act  of  incorporation?  It  is  m(:rely 
a  power  granted  by  a  legislature,  to  several  individuals, 
to  do,  as  a  society^  some  innocent  act,  which  they  may 
thus  do  more  conveniently,  but  which  any  one  of  them 
mighty  if  he  saw  fit,  do  without  any  act  of  the  legisla- 
ture. I  say,  some  i^mocent  act,  for  what  is  not  innocent, 
should  be  allowed  neither  to  individuals  nor  to  societies. 

The  necessity  of  such  a  provision  is  uKinifest.     Many 


LEGISLATIVE    POWER    OVER    BANKS.  281 

innocent  purposes  can  be  accoiiij)lishetl,  only  by  many 
j)ersons  associated    together.       iSuch   are   purposes    o( 
( liaiity,  of  science,  of  internal   improvement,  and  many 
oth(  rs.      Without  corporate   powers,  persons  so  associ 
ated  could  neither  hold  property,  nor  enforce  any  regu 
lations  upon  each  other  ;  and,  besides,  without   them, 
they  could   not   be   known  in  law,  nDr  could  a  creditoi 
Jiave  any  claim  upon  the  property  which  they  might  hold 
[Tence,  when  individuals  wish  to  be  associated  for  ary 
innocent  pinpose,  llieij  may  claim  an  act  of  incorpora 
tion  as  a  right ;  and  it  is  necessary,  for  the  protection  ol 
the  community^  that  it  should  be  granted.      And  hence, 
from  both  of  these  considerations,  it  is  incumbent  ii})uii 
a  legislature  to  grant  it.      The  simple  princi})le  involved 
is  this  :    Is  this  an  innocent  means  of  promoting  my  own 
haj)i)iness  ?     If  it  be,  society  is  under  obligation  to  afford 
it  to  me. 

Sometimes,  the  corporate  power  is  conferred  by  a 
separate  act,  in  every  individual  case  ;  at  other  times, 
a  general  law  is  passed,  empowering  any  individuals  to 
become  a  corporate  body,  by  conforming  to  specified 
conditions.  Under  the  latter  case,  come  the  laws  of 
partnerships  in  general  ;  or,  more  particularly,  the  law 
of  limited  partnerships,  of  the  State  of  IVew  York.  By 
this  last  act,  any  nmnber  of  individuals  may  unite  in 
business,  and  be  liable  in  no  greater  amount  than  they 
have  contributed  ;  that  is,  to  all  intents  and  purposes 
may  become  a  corporation,  by  complying  with  certain 
conditions.  Such  is  also  the  case  with  ecclesiastical 
corporations  in  that   State. 

Now,  in  what  manner  soever  this  is  done,  its  effect  is 
simply  this  :  It  gives  to  certain  persons  associated  to- 
gether, under  certain  circumstances,  the  power  to  ^ct, 
in  the  same  manner  as  an  individual  might  act,  and  places 
ihem  under  the  same  responsibilities  as  those  under 
which  an  individual  is  placed.  This  is  the  meaning  of 
an  act  of  incorporation.  And  to  make  heavy  charges, 
and  exact  bonuses  for  the  passing  of  such  an  act,  is  un- 
just and  oppressive.  A  man  might  as  well  be  charged 
for  the  right  of  trial  by  iury. 
24* 


282  LEGISLATIVE    POWER    OVER    BANKS. 

This,  then,  is  the  meaning  of  an  act  of  incorporation, 
and  this  is  what  is  really  meant  by  the  figurative  and  mys- 
terious tern)s,  "a  creulure  of  the  legislature.''^  If,  then, 
a  legislature  possess  unlimited  power  over  a  bank,  be- 
cause it  has  received  an  act  of  incorporation,  it  possess- 
es the  same  unlimited  power  over  all  its  creatures ;  that 
is,  over  every  thing  that  is  incorporated.  If  the  p(»wer 
exist,  and  exist  for  this  reason,  it  exists  in  every  case  to  * 
uhirh  the  reason  applies.  Thus,  he  who  owns  a  manu- 
fdctory  alone.,  may  conduct  it  as  he  pleases,  and  buy  and 
sell  when  he  chooses  ;  subject  only  to  the  ordinary  laws 
of  the  land.  But,  if  ten  men  become  incorporated,  as 
a  manufacturing  company,  they  are  under  the  unlimited 
power  of  the  legislature  ;  and  the  legislature  has  an  un- 
controlled right  to  say  when,  and  where,  and  of  whom 
they  nuist  buy  ;  and  when,  where,  and  to  whom  they 
must  sell  ;  or  whether  they  may  buy  or  sell  at  all.  Or, 
again  ;  An  individual  has  the  right  to  worship  God  as  he 
pleases.  But,  \{  several  individuals  wish  to  unite  togeth- 
er in  the  worship  of  God,  and,  for  their  own  conven- 
ience, desire  to  be  incorporated  for  the  promotion  of 
this  object,  their  rights  of  conscience  cease  ;  and,  after 
they  have  erected  their  house  of  worship,  a  legislature 
may  shut  it  up,  command  them  to  worship  when  ai.d  how 
it  pleases,  or  may  command  them  to  worship  INIaliomet 
or  Juggernaut  ;  and  all  this  is  no  oppression,  but  is  a 
matter  of  simple,  honest,  common-sense  justice  ;  be- 
cause these  individuals  have,  for  their  own  convenience, 
and  for  the  security  of  others,  become  in  law  a  corpo- 
rate body  ! 

But  even  this  is  not  all.  Legislation  never  confers 
ny  right  whatever  ;  it  only  confirms  those  rights  which 
previously  existed.  A  legislative  act  can  confirm  me  in 
the  possession  of  a  house  which  is  my  own  property  ; 
but  it  can  give  me  no  right  to  take  possession  of  a  house 
which  is  the  property  of  my  neighbor.  In  the  case  of 
corporations,  the  same  principle  holds.  A  legislative 
act,  only  defines  and  establishes  for  several  individuals, 
a  right  which  they  prev'ously  possessed.  But  the  case 
is  the  same  with   almosf.  all  the  rest  of  our   possessions. 


LEGISLATIVE     POWER    OVER    BANKS.  233 

We  hold  them  under  laws  by  which  our  right  is  defined 
and  establislied.  So  that,  upon  this  principle,  every  man 
is  the  creature  of  the  legislature  ;  that  is,  a  legislature,  is 
the  fountain  o(  all  power,  the  creator  of  all  rv^ht^  and 
deals  out  to  its  creatures  and  vassals^  whatever  of  liberty 
or  of  possession  it  sees  fit  to  confer.  Tiiis  is,  surely,  a 
novel  doctrine  to  advance  in  the  audience  of  a  free  j)eo- 
ple  ;  and  whenever  it  is  advanced,  the  time  has  mani- 
festly arrived,  for  a  people  which  intends  to  continue 
free,  to  turn  their  attention  to  the  consideration  of  fiist 
principles. 

The  simple  truth  in  the  case  must  be  at  once  appa- 
rent. An  act  of  incorporation,  has  no  other  eftect,  per 
se,  than  to  place  a  society  under  the  same  protection  as 
individuals,  and  subject  it  to  the  same  responsibilities  as 
individuals  ;  that  is,  to  place  it  under  the  common  and 
universal  laws  of  the  land.  If,  together  with  this,  a 
corporation  enters  into  a  contract  with  the  legislature  to 
do  certain  acts,  this  is  another  ad'air,  and  is  subsequent 
to,  and  diiFerent  from,  the  act  of  incorporation.  By 
such  contracts,  both  parties  are  equally  holden.  But 
this  makes  the  corporation  no  more  a  creature  of  the 
legislature,  than  it  makes  the  legislature  a  creature  of  the 
corporation.  A  legislature  may  agree  with  a  contractor 
to  build  a  wall  ;  but  this  makes  the  builder  in  no  respect 
a  creature  of  the  legislature  ;  nor  does  it  give  them  pow- 
er over  him  in  any  other  respect,  than  to  oblige  him  to 
fulfil  his  contract,  according  to  the  laws  of  the  land. 

The  only  valid  objection  that,  so  far  as  I  perceive,  can 
be  urged  against  these  considerations  is  this.  An  act  of 
incorporation  changes  the  responsibility  of  the  incorpo- 1 
rators.  Without  such  act  all  their  property  would  be 
liable  for  the  debts  of  the  incorporation  ;  with  it  the  por- 
tion which  they  have  contributed  alone  is  liable.  Thai 
there  is  weight  in  the  objection  T  readily  grant.  Il 
would,  however,  prevail  no  further  than  this.  Tt  would 
show,  either  that  no  such  incorjiorations  should  be  estab 
lished  ;  or,  that  the,  legislature  establishing  them  was 
bound  to  enforce  such  regulations,  that  the  safety  of  the 
public  should  be  exposed  to  no  additional  jeopardy.      In 


lL 


2S4  LEGISLATIVE    POWER    OVER    BANKS. 

this  conclusion  I  heartily  concur.  After  this  is  done,  it 
does  not  follow  from  the  ohjection  that  a  If^gislature  has 
aiyy  more  right  to  oppress  or  to  favor  a  hank,  than  to  op- 
press or  favor  an  individual. 

Rut  it  is  also  asserted,  that  hank  directors  are  the 
agents  of  the  government,  or  of  the  legislature,  and 
hence,  that  they  are  under  the  unlimited  control  of  the 
government,  which  is  the  principal.  The  reason  for 
this  assertion  is,  that  the  government  has  the  right  to 
control  the  circulating  medium  ;  that  paper  money  is  the 
circulating  medium  ;  that  bank  directors  issue  paper 
money  ;  and  that,  therefore,  they  are  under  the  control 
of  the  government. 

To  this,  it  may  be  replied  : 

1.  The  control  of  the  government  over  the  circulat- 
ing medium,  is  limited  in  degree  ;  and  even  whhin  this 
degree^  it  is  limited  by  the  object  for  which  it  may  be 
exerted.  A  government  has  a  right  to  enact  such  laws 
as  may  ensure  the  payment  of  the  debts  of  a  bank,  as 
well  as  of  all  other  debts,  and  as  may  prevent  excessive 
fluctuation  in  the  circulating  medium  ;  that  is,  they  have 
a  right  to  take  care  that  the  circulating  medium  be  sound 
and  convenient,  but,  1  see  not  that  they  have  any  other 
right  over  it.  x\nd  this  right  is  equally  limited,  whether 
the  circulating  medium  be  paper  or  money. 

2.  Suppose  bank  directors  to  issue  this  circulating 
medium,  and  that,  on  that  ground,  they  are  imder  the 
control  of  a  legislature  ;  they  are  then  under  its  control 
only  within  the  limits,  and /or  the  pitrposes  above  speci- 
fied ;  that  is,  they  are  to  be  placed  under  the  general 
laws  for  the  regulation  of  the  circulating  medium.  To 
exert  any  other  power,  or  to  exert  a  power  for  any  other 
purpose,  is  tyranny. 

3.  But  let  us  inquire  in  what  sense  bank  directors  are 
agents  of  government.  The  government,  in  their  case, 
as  in  many  others,  requires,  and  has  a  right  to  require, 
that,  in  the  conduct  of  their  business,  they  shall  conform 
to  certain  principles,  made  necessary  for  the  good  of  the 
whole.  But  doss  this  render  them  agents  of  the  gov- 
ernment ?     He  who  sells  gunpowder,  is  obliged  to  sell 


LEGISLATIVE    POWER    OVER    BANKS.  285 

It   under   special  regulations  ;  but  is  he,  on  this  account, 
an    agent    of  govei  lunent  ?     Koery    man^   vviio  buys  or 
sells  at  all,  buys  or  sells  under  some  regulations  of  a  leg 
islature  ;  but  is  Ae,  on  this   account,   tlieir  agent^    over 
whom  they  have  the  right  of  unlimited  control  ? 

But,  take  a  still  more  analogous  case.  Sup^ose  an 
indioidual,  or  a  mining  company^  to  obtain  from  their 
mines,  one  hundred  thousand  dollars  a  year.  'Ihis  they 
appropriate  to  the  business  of  loans.  They  have,  how 
ever,  no  right  to  coiii  it  themselves,  but  must  have  it 
coined  at  the  mint  ;  that  is,  if  they  be  a  company,  they 
must  be  incorporated,  in  order  to  carry  their  purposes 
into  effect  ;  and  they  must  carry  them  into  effect,  sub- 
ject to  such  rules  as  the  good  of  the  whole  may  demand. 
But  does  this  render  them,  or  their  directors,  the  agents 
of  government  ?  or  does  this  give  to  the  government  any 
other  power,  than  that  which  it  exercises  over  any  other 
individual  .•* 

Suppose,  now,  several  individuals  have  obtained  one 
hundred  thousand  dollars,  in  any  other  way  than  by 
mining,  and  that  they  wish  to  employ  it  in  the  business 
of  loaning.  They  are  u')der  obligations  to  conform  to 
the  general  laws  made  for  the  regulation  of  the  cirt.  ulat- 
ing  medium,  but  this  is  all.  They  do  not,  in  this  man- 
ner, become  the  agents  of  government,  any  more  by 
loaning,  than  by  doing  any  thing  else.  And  suppose 
that  their  customers  prefer  to  borrow  paper,  instead  of 
metallic  money.  .If  they  issue  paper,  they  are  under 
obligation  to  issue  it  in  obedience  to  the  laws  enacted 
for  the  purpose  of  insuring  its  goodness  and  stability  ; 
bu:  tney  are  not,  on  this  account,  the  agents  of  govern- 
ment, nor  has  the  government  any  more  power  over 
them  than  it  has  over  any  other  individuals.  It  seems 
to  me,  therefore,  that  the  second  assertion,  namely,  that 
bank  directors  are  the  agents  of  the  government,  is 
wholly  gratuitous. 

But  it  is  said,  that  the  banks  have  a  monopoly  of  this 
article  money  ;  and  that,  therefore,  they  are,  of  right, 
subject  to  particular  legislation.  To  this,  1  reply  ; 
who  creates  this  monopoly  .''     Certainly  not  the  banks, 


286  LEGISLATIVE    POWER    OVER    BA.\KS. 

but  the  legislature  themselves.  If  the  legislature  refuse 
banking  privileges  to  those  who  deserve  theni,  or  gram 
thein  under  such  terms,  that  but  few  persons  can  accept 
of  them,  and  thus  diminish  the  amount  of  banking  capi- 
tal, and  render  it  inadequate  to  the  wants  of  the  commu- 
nity, they  are  the  authors  of  the  monopoly  ;  and  they 
may  not  plead  their  own  wrong,  as  an  excuse  for  injus- 
tice* Were  they  to  oblige  a  shoe-maker  to  pay  ten 
thousand  dollars  foi'  the  privilege  of  exercising  his  profes- 
sion, and  then,  because  there  were  but  one  or  two  shoe- 
makers in  a  city,  undertake  to  regulate  his  business, 
interfere  with  his  concerns,  and  fleece  him  over  again, 
on  the  grbund  that  he  possessed  a  monopoly,  we  should 
speak  very  mildly  of  such  legislation,  when  we  called  it 
oppression  and  tyranny.  He  would  very  naturally  say  : 
"  1  do  not  ask  you  for  your  monopoly.  It  is  all  of  your 
own  imposing.     It  is  a  creature  of  the  legislature.     Let 


*  The  fact,  no  less  notorious  than  disgraceful,  is,  that,  in  many  of 
our  States,  bank  charters  are  granted  or  denied  for  purely  political 
reasons.  Tliey  are  reserved  as  tlie  reward  for  services  done  to  the 
dominant  party.  Hence,  one  half  lA' \he  community  at  once  is,  by  this 
policy,  excluded  from  the  privilege  of  employing  tlieir  capital  in  this 
manner.  The  charters  tiius  granted,  are  frequently  granted  not  to 
those  who  are  possessed  of  the  necessary  capital,  but  to  those  who 
have  promoted  an  election.  It  is  manifest  that  neither  activity  nor 
skill,  in  political  intrigue,  will  add  any  thing  to  the  value  of  a  bill,  or 
ati'ord  any  guaranty  for  the  honest  management  of  a  bank.  If,  how- 
ever, as  is  fVe([uenlly  tlie  case,  tiie  applicants  do  not  wisii  to  hold  the 
shares  liiemsiivi-s,  tliey  sell  tliein  at  an  advance,  before  any  of  the 
capital  has  been  paid,  to  persons  of  the  other  party.  These  last, 
therefore,  are  obliged  to  pay  tiiis  advance,  as  a  bonus  to  those  who 
have  obtained  the  charter;  and  thus,  their  property  is  taxed  at  the 
outset,  to  reward  the  industrious  partisan.  This  advance,  by  its 
wiiole  amount,  reduces  tlie  v;ilue  f)f  banking  capital,  and  prevents 
men  from  so  investing  their  pro|)erty.  In  this  manner,  the  nwrnopoiy 
is  created  ;  and  tiuis,  very  conunonly,  are  spurious  banks  brought 
into  existence.  It  will  be  found,  I  believe,  in  tiie  greater  number  of 
instances  in  whicii  fraud  has  been  detected  in  the  management  of 
banks,  that  tliey  have  been  banks  wliich  have  been  decidedly  parti- 
san in  their  character.  The  evils  resulting  from  this  system  are, 
liowever,  all  charged  upon  banks  and  bank  directors.  No  one  thinks 
of  arraigning  the  legislature,  from  which  all  these  evils  truly  eman- 
ate. In  some  of  the  States,  hanking  capital  is  taxeii  so  heavily,  that 
it  will  nf)t  yield  a  fiir  profit  if  honestly  conducted.  Men  of  charac- 
ter and  ca])itMl.  tliereiiire,  abandon  banking,  and  the  stock  fiills  into 
the  hands  of  the  les.s  scru|)ulous. 


LEGISLATIVE    POWER    OVER    BANKS.  287 

every  one  who  chooses,  make  shoes,  subject  only  to  thr 
coiiinioii  laws  of  the  land,  and  both  ihe  monopoly,  and 
your  reasons  for  interfering  with  ine  in  consecjnence  of 
it,  will  cease  together."  And  the  case  is  the  same  with 
banks.  Let  all  banking  be  governed  by  principles 
which  shall  ensure  the  security  of  the  community,  and 
then  let  banks  be  multiplied  at  will.  If  they  yield  more 
than  an  average  profit,  they  will  thus  be  increased  until 
their  profit  is  reduced  to  that  of  other  business.  If  they 
yield  less,  they  will  be  diminished,  until  tliey  merel}i 
supply  the  wants  of  the  community.  Thus,  the  monop- 
oly, and  the  reason  for  oppression  founded  on  it,  w'il! 
terminate  together. 

I  have  pursued  this  subject  to  a  greater  extent  than  I 
should  otherwise  have  done,  were  it  not  that  a  very 
general  disposition  exists,  and  has  always  existed,  to  in- 
terfere with  the  rights  of  capital  ;  and  because  no  coun- 
try can  long  be  prosperous,  where  these  rights  are  not 
respected.  Men  too  frequently  assume,  tliat  capital, 
devoted  to  the  purposes  of  loaning,  is  owned  by  the 
rich  ;  that,  by  overtaxing  and  oppressing  it,  the  rich 
only  Slider  ;  ind,  as  the  rich  are  always  the  minority, 
they  must  bear  it,  without  any  redress.  Now,  setting 
aside  the  equity  of  such  a  notion,  it  is  still  proper  to  re- 
mark, that  there  is  nothing  which  so  readily  eludes  the 
grasp  of  oppression,  as  capital  of  this  kind.  It  is,  of  all 
capital,  the  :  ost  easily  transferred.  If  oppressed,  it 
will  be  transferred  to  more  congenial  climates  ;  the  in- 
dustry of  the  country  from  which  it  has  been  removed, 
will  languish  ;  its  population  will  diminish  ;  and  the  ma- 
jority will  find,  too  late,  that  the  blow  which  was  aimed 
at  the  mmority  has  recoiled  upon  themselves.  There 
is  no  better  policy,  either  for  nations  or  for  indi\  iduals. 
than  strict  and  even-handed  justice. 

The  course  of  legislation  with  respect  to  banks,  has 
too  frequently  been  at  direct  variance  with  the  principles 
of  political  economy.  By  charging  excessive  bonuses 
for  charters,  and  imposing  excessive  taxes  upon  stocks, 
they  have  taught  banks  the  lesson  of  injustice.  While 
they  have  been  doing  this,  however,  they  have  generall) 


2S8  LEGISLATIVE    POWER    OVER    BANKS. 

been  willing  to  defend  banks  from  the  consequences  of 
suspension,  and  continue  their  charters  while  they  violate 
their  chartered  obligations.  The  language  of  this  con- 
duct, when  truly  expounded,  is  simply  this,  Let  ut 
fleece  you  and  you  may  fleece  the  public. 


BOOK    THIRD 


DISTRIBUTION. 


We  have  seen  that,  in  order  to  the  creation  of  vslue, 
It  is  necessary  that  labor  be  united  to  capital.  In  some 
cases,  both  of  these  are  the  property  of  the  same  indi- 
vidual ;  that  is,  the  same  person,  both  owns  the  capital 
and  performs  the  labor.  In  by  far  the  greater  number 
of  instances,  however,  they  are  the  property  of  diti'erent 
individuals  that  is,  one  person  owns  the  capital,  and 
another  person  performs  the  labor.  As,  when  the  same 
person  "owns  both  labor  and  capital,  the  whole  increase 
of  value  becomes  his  exclusive  property  ;  so,  when 
these  belong  to  difierent  individuals,  the  value  belongs 
to  them  in  common  ;  that  is,  a  share  of  it  is  the  portion 
of  each. 

If,  then,  profit  arise  from  any  operation  in  industry, 
which  has  been  the  joint  result  of  the  labor  of  one  man, 
and  the  capital  of  another  man,  it  is  a  matter  of  some 
consequence  to  ascertain  the  principles,  on  which  the 
division  of  this  profit,  or  the  distribution^  shall  be  ef- 
fected. And,  besides,  in  every  import?nt  operation,  a 
great  variety  of  laborers  is,  of  necessity,  employed  ;  and 
of  these  laborers,  tlie  skill  and  talents  are  very  dissimi- 
lar. To  these  difTerent  persons,  very  different  piopor- 
tions  of  the  profit,  equitably  belong.  And,  also,  the 
value  of  the  capital  thus  employed,  may  be  dilferent  at 
diiferent  limes,  and  in  dili'erent  occiqiations.  Hence, 
there  will  arise  a  dillerence  in  the  proportion  of  profit 
25 


290  DISTRIBUTION. 

which  shall,  at  different  times,  be  assigned  to  a  giveis 
amount  of  capital.  And,  if  it  be  said,  that  the  remun- 
eration in  these  cases  is  always  arranged  aniong  men  by 
mutual  consent  ;  it  may  be  still  important  to  ascertain 
the  principles  on  which  this  mutual  consent  is  founded. 
This  book  would,  therefore,  naturally  be  di voided  into 
two  parts  :  First,  IVages,  or  the  price  of  labor  ;  and, 
Secondly,  Interest,  or  the  price  of  capital.  But,  inas- 
much as  Land  is  a  form  of  capital,  in  some  measure 
peculiar,  it  may  be  more  convenient  to  consider  it  sepa- 
rately. We  shall,  therefore,  divide  the  present  book 
into  three  chapters. 

I.  Wages,  or  the  price  of  Labor. 

II.  Interest,  or  the  price  of  Money. 
Ill    Rent,  or  the  price  of  Land. 


CHAPTER  FIRST. 

OF  WAGES,   OR  THE   PRICE    OF  LABOR. 

In  this  chapter,  I  shall  consider.  Is  .  The  general 
princi|)les  of  wages ;  and,  2illy.  The  special  circupi- 
ftaiices,  by  which  those  principles  are  modified. 


SECTION  I. 

THE   GENERAL  PRINCIPLES  OF  WAGES. 

The  price  of  any  thing,  is  its  exchangeable  value,  ex- 
pressed in  the  form  of  money. 

Exchangeable  value,  is  cost,  plus  the  effect  of  supply 
and  demand. 

In  order,  theefore,  to  understand  the  exchangeable 
value  of  labor,  we  must  consider,  1st.  Its  cost ;  and,  2dly. 
The  effect  of  supply  and  demand  upon  it. 

I.    Of  the  Cost  of  Labor. 

Labor  may  be  divided  into  two  kinds:  1st.  Simple 
labor.,  or  that  which  is  unconnected  with  previously  ac- 
quired skill  ;  and,  2dly.  Educated  labor,  or  that  in 
which  industry  is  combined  with  the  results  of  previous 
education. 

First.      Of  simple  labor. 

In  order  to  produce  this,  all  that  is  necessary  is  mus- 
cular strength,  resulting  from  a  properly  formed  body, 
and  a  sound  mind,  in  ordinary  healih. 

But,  in  order  to  the  production  of  health  and  muscular 
strength,  it  is  necessary  that  the  human  being  be  suppli- 
ed with  food,  clothing,  shelter,  and,  at  times,  with  medi- 
cine and  medical  attendance.     If  a  n)an  have  nothing  to 


292  GENERAL    PRINCIPLES    OF    WAGES. 

eat  to-day,  he  cannot  labor  to-morrow.  If,  for  a  few 
days,  he  be  deprived  of  food,  he  will  inevitably  die.  If 
his  food  be  insufficient  in  quantity,  or  of  improper  quali- 
ity,  his  strength  will  diminish,  and,  of  course,  the  mus- 
cular efibrts,  of  which  he  would  be  otherwise  capable, 
will  be  decreased.  If  this  be  continued  but  for  a  very 
short  time  he  will  become  sick,  and  thus  lose  the  power 
of  laboring  altogether.  If  he  be  not  relieved,  he  will 
die.  Hence  we  see,  that  there  is  a  natuial  minimum  of 
the  cost  of  labor.  The  least  cost,  is  that  which  is  suffi- 
cient to  give  the  laborer  all  the  necessaries  of  life.  If 
we  give  less,  we  not  only  diminish  the  power  of  labor, 
but,  in  a  short  time,  take  it  away  altogether.  Hence, 
the  minimum  price  of  wages,  does  not  depend  upon  the 
will  of  employers,  but  upon  those  physiological  laws 
which  regulate  the  existence  of  man. 

2.  But,  this  is  not  all.  Man  is  short-lived.  The  spe- 
cies is  kept  in  existence  by  succession.  Unless  chil- 
dren be  reared,  the  race  would  soon  become  extinct. 
And  children  are,  for  several  years,  not  only  unable  to 
earn  any  thing  towards  tJieir  own  support,  but  they  also 
require  a  large  portion  of  the  time  and  labor  of  the 
parent.  A  mother,  who  has  the  care  of  several  chil- 
dren, and  who  also  provides  for  the  domestic  wants  of 
her  family,  is  rarely  capable  of  much  additional  labor. 
Hence,  in  order  to  keep  the  number  of  laborers  the  same, 
in  any  particular  country,  it  is  necessajy  that  the  parent 
or  parents  receive  sufficient  wages,  not  only  to  provide 
food,  clothing,  and  shelter  for  themselves,  but  ^Iso,  for 
at  least  two  children,  until  the  children  are  able  to  sup- 
port themselves. 

3.  But,  this  is  not  all.  The  life  of  man  is  often  pro- 
longed beyond  the  period  of  active  labor.  In  old  age,  a 
man  is  either  utterly  disqualified  for  labor,  or  else  his  la- 
bor is  insufficient  to  support  him.  Hence,  he  must  either 
be  supported  by  his  children,  or  else  he  must,  when  in 
full  strength,  have  accimuilated  sufficient  property  to 
support  him  in  his  decrepitude.  Hence,  the  wages  of 
labor  must  be  sufficient,  not  only  to  support  the  laborer, 
and  at  least  two  children,  but  also   to  provide  for,  or  to 


GENERAL    PRINCIPLES    OF    WAGES.  293 

sustain  him,  in  old   age,    when  liie  power  of  labor  is  ex- 
hausted. 

If  so  much  as  this  be  earned  by  the  laborer,  the  pop- 
ulation of  a  country  may  remain  stationary.  If  two 
children  be  reared  by  every  human  f)air,  these  will  sup- 
ply, but  will  no  more  than  supply,  the  ravages  of  death 
Tliis,  therefore,  is  manifestly  the  lowest  price  of  labor. 
If  wages  do  not  equal  the  amount  necessary  for  this  re- 
sult, men  will  become  sick  and  will  die  ;  a  less  propor- 
tion of  children  than  this  will  be  reared  ;  and  population 
will  diminish.  The  lowest  price  at  which  the  labor  of 
any  animal  can  be  procured,  is  the  cost  of  rearing  him, 
and  of  maintaining  him  in  health  and  vigor. 

But,  it  is  the  fact,  that  the  natural  rate  of  the  produc- 
tiveness of  the  human  species  is  more  rapid  than  that  of 
two  children  to  two  parents.  In  favorable  circumstan- 
ces, two  parents  frequently  rear  six,  eight  or  ten  chil- 
dren. The  number  of  children  who  are  born,  does  not 
depend  upon  the  circumstances  of  the  parents.  INIore 
children  are  commonly' born  to  the  poor,  than  to  the 
rich.  The  rich  are  often  childless  ;  the  poor  very  rare- 
ly. But,  suppose  that  the  laborer  receive  only  suffi 
cient  wages  to  enable  him  to  support  himself  and  wife 
and  two  children  ;  and  tliat  his  family  amount  to  six  oi 
eight  human  beings,  it  is  manifest  that  some  of  thern 
must  perish.  The  food  of  two,  will  not  sustain  six  or 
eight.  The  others  must  starve,  or,  in  some  way  or 
other,  die  of  want.  The  manner  in  which  this  occurs, 
it  is  painful  to  contemplate  ;  though,  in  .i:ost  of  the  older 
countries,  it  is  frequently  seen.  The  pressure,  in  fuch 
a  case,  must  fall  upon  either  the  parent  or  the  child,  and 
parental  affection  generally  decides  upon  which  it  shall 
fall  fust.  When  parental  alFection  is  strong,  the  parent 
denies  himself  the  necessaries  of  life,  in  order  to  support 
his  children,  until  .his  constitution,  worn  down  by  im- 
proper and  insufficient  food,  sinks  beneath  the  burden, 
and  he  dies  in  middle  age,  leaving  his  children-  helpless. 
When  the  parental  feeling  is  less  acute,  the  sulFering 
falls  directly  upon  the  children.  Their  food  being  scan- 
ty and  unhealthv,  but  few  survive  early  infancy  ;  and 
25* 


294  NATURAL  COST  OF  LABOR. 

those  who  ►do  survive  it,  grow  up  feeble  and  unhealthy 
A  tiuiiian  infant  is  a  tender  plant,  easily  cut  down,  and 
liable  to  frequent  diseases.  Measles,  whooping-cough, 
croup,  teething,  acute  and  chronic  complaints  of  the 
lungs,  head,  and  abdominal  viscera,  require  assiduous  at- 
tention, warm  clothing,  and  suitable  food  for  the  pa- 
tient, or  else  its  chance  of  living  is  very  small.  When 
children,  ill-fed,  ill-clothed,  and  without  medicme  and 
medical  attendance,  are  attacked  by  these  diseases,  they 
die  by  thousands.  When  a  portion  of  a  family  is  thuj 
removed  by  death,  a  larger  portion  of  the  necessaries  of 
life  remains  for  those  who  survive  ;  and,  thus,  their 
chance  of  life  is  increased.  Thus,  out  of  a  very  great 
number  of  births,  frequendy,  but  two  or  three  children 
are  reared.  And  this  view  of  the  subject  is  abundantly 
supported  by  facts.  Adam  Smith  informs  us,  that  it  is 
no  uncommon  thing  to  see  a  woman,  in  the  Highlands  of 
Scotland,  who  has  borne  twenty  children,  of  whom  not 
more  tiian  two  have  arrived  at  adult  years.  The  same 
author  adds,  that  although  the  children  born  in  military 
barracks  are  numerous  and  apparently  healthy,  yet  offi- 
cers have  informed  him,  that  rarely  enough  of  them  are 
reared,  to  supply  the  regiments  with  drummers  and  fifers. 

Now,  we  can  scarcely  suppose  that  to  be  the  condition 
of  man  which  his  Creator  intended,  in  which  so  laarge 
number  perish  in  infancy,  from  suffering,  from  hardship, 
and  from  want.  Hence,  I  supj)ose  the  natural  cost  of  la- 
bor, or  that  cost  w  hich  corresponds  with  the  proper  con- 
dition of  man,  would  be  that  which  allows  of  the  rearing  of 
such  a  number  of  children  as  naturally  falls  to  the  lot  of 
the  human  race.  This,  however,  |)re-supposes  the  laboy- 
eis  to  he  industrious,  virtuous,  and  frugal.  If  they  be  im- 
provident, indolent,  intemperate,  and  jjrofligate,  and  thus 
either  do  not  earn  a  competency,  or  else,  having  earned 
it,  squander  it  in  vice,  the  fault  lies,  not  in  their  wages, 
but  in  themselves.  Of  course,  the  correction  must  come, 
not  from  a  change  in  wages,  but  from  a  change  in  habits. 

It  is,  however,  here  to  be  remarked,  that  what  is 
necessary  to  the  sustentation  and  comfort  of  a  himian 
being,  differs  greatly  in  dillerenl  climates.     In  northern 


NATURAL  COST  OF  LABOR.  295 

latitudes,  liuman  beings  seem  to  need  a  larger  portion  of 
aiiiinul  food,  in  order  to  endure  labor.  Tbe  lvs(juinianx 
live  upon  animal  food  entirely,  and  Sir  E.  I'arry  informs 
us,  that,  while  wintering  at  the  north  pole,  the  appetite 
of  both  his  officers  and  men  was  much  stronger  than 
usual,  not  only  for  animal  food,  but  for  animal  food  of 
the  richest  and  most  nutritious  description.  And  as  an* 
imal  is  more  expensive  than  vegetable  food,  the  north- 
ern laborer,  on  this  account,  is  more  expensive  than  the 
southern  Again  :  In  cold  climates,  clothing  is  much 
more  expensive.  A  laborer  must  provide  both  winter 
and  summer  clothing  ;  he  must  protect  himself  from  the 
cold  and  wet,  or  he  will  sicken  and  die.  In  cold  cli- 
mates, much  greater  expense  is  incurred,  in  the  erection 
of  houses.  A  comfortable  house,  in  a  northern  climate, 
costs  the  labor  of  several  men  for  several  weeks,  and  of 
some  men  of  considerable  skill.  In  India,  a  day  or  two 
are  sufficient  to  erect  a  bamboo-house,  which,  in  that 
climate,  answers  tolerably  well  for  the  j)urposes  of  a 
habitation.  And,  besides  this,  in  a  cold  climate,  fuel, 
which  must  be  used  for  from  three  to  nine  months  in  the 
year,  is  a  very  great  item  in  the  bill  of  aiuuial  expense. 
In  warm  countries,  fuel  is  used  for  no  other  })urpose  than 
that  of  cooking  ;  and  for  this  purpose,  there,  a  very 
small  quantity  suffices. 

These  circumstances  are  sufficient  to  account,  in  pan, 
for  the  different  prices  of  labor,  in  southern  India,  and 
in  the  northern  parts  of  Europe,  and  of  the  United 
States.  Laborers  in  Batavia  are  hired  for  four  cents  a 
day  ;  and,  in  India,  I  believe,  they  are  hired  for  a  les3 
sum.  This  would  scarcely  pay  for  the  fuel,  with  which 
the  meals  of  a  northern  laborer  are  cooked. 

It  would  seem,  at  first  view,  from  these  facts,  thai 
laborers  in  southern  latitudes  would  have  a  great  advau 
tage  over  those  at  the  north,  and  must,  of  necessity,  un 
•dersell  them  in  every  thing.  But  such  seems  not  to  be 
the  case.  The  enervating  nature  of  the  climate,  unfits 
them  for  labor  ;  and  indisposes  them  to  the  putting  forth 
of  intellectual  skill.  Hence  it  is,  that  this  labpr  is  mere 
feeble  muscular  force,  accompanied  by  scarcely  any  of 


296  NATURAL  COST  OF  LABOR. 

the  advantages  derived  from  natural  agents.  Tne  rigors 
of  a  northern  latitude  compel  men  to  invention,  and  in- 
vigorate them  for  continued  efiort.  Hence,  ahliongh  a 
northern  laborer  receives  one  dollar,  or  one  dollar  and 
fifty  cents  per  day,  and  the  Hindoo  receives  only  four 
cents,  yet  the  former  is,  in  fact,  the  cheaper  laborer  : 
that  is,  it  is  the  most  economical  to  employ  him.  And 
the  evidence  of  this  is  seen  in  the  fact,  that  raw  cotton 
is,  at  present,  carried  from  India,  manufactured  in  Great 
Britain,  and  then  carried  back  to  India,  and  sold  cheap- 
er than  it  can  be  made  in  India  by  the  native  workmen. 

Secondly.  I  have,  thus  far,  treated  only  of  the  cost 
o(  simple  labor  ;  that  is,  of  labor  with  which  no  such  skill 
13  united,  as  requires  a  previous  education. 

But,  this  is  only  a  part  of  the  labor  which  is  employed 
by  man.  A  large  portion  of  it,  requires  special  and 
peculiar  training.  This,  of  course,  adds  to  its  cost. 
Suppose,  as  1  have  already  stated,  that  the  natural  price 
of  simple  labor  were  merely  sufficient  to  sustain  a  family, 
consisting  of  the  ordinary  number  of  persons.  A  man 
would,  therefore,  by  labor,  without  any  education,  under 
such  circumstances,  earn  this  amount.  But,  if  another 
labored  for  the  same  number  of  hours,  but  labored  at  an 
operation  which  he  could  not  learn  to  perform,  without 
spending  six  or  seven  years  in  acquiring  an  education,  it 
is  manifest  that  the  second  would  be  entitled  to  addition- 
al wages.  Thus,  suppose  the  laborer  must  spend  seven 
years  in  acquiring  a  knowledge  of  his  trade.  During 
this  time  he  is  earning  nothing.  Now  his  wages,  at  com- 
pound interest,  if  he  had  been  at  profitable  labor,  would 
amount  to  a  considerable  sum,  specially  if  they  had  been 
invested  in  capital,  which  might  have  been  united  with 
his  own  labor.  He  is  entitled,  therefore,  to  such  an 
addition  to  his  wages,  as  would  pay  the  interest  upon 
this  amount.  Besides,  in  many  cases,  the  learner  not 
only  earns  nothing,  but  is  obliged  to  feed  and  clotl* 
himself.  This  amount  is  to  be  added  to  the  cipital 
which  he  has  expended,  and  for  which  his  wages  should 
pay  the  interest.  Nor  is  this  all.  The  learner  is  fre- 
quently   obliged    to    pay    a    large    sum  for    instruction. 


Natural   cost  of  labor.  .297 

This,  also,  is  to  be  added  to  iiis  investment,  for  which 
he  is  to  he  paid  when  we  employ  liini.  Thus,  in  the 
learned  professions,  a  student  is  obliged,  coinmonly,  to 
spend  two  or  three  years  in  preparing  for  college,  to 
spend  four  years  in  college,  and  three  years  in  professional 
studies,  before  he  ij"  admitted  to  practice.  During  the 
whole  of  these  nine  or  ten  years,  in  which  he  earns  noth- 
ing, he  must  be  fed,  clothed,  and  furnished  with  books, 
and  must  pay  a  very  considerable  sum  to  his  instructors 
for  tuition.  He  must,  in  most  cases,  also  possess  the 
means  to  meet  all  these  expenses,  before  he  commences. 
Now,  had  he  used  such  a  sum  skilfully,  from  the  time  at 
which  he  commenced,  to  that  at  which  he  concluded  his 
studies,  it  would  have  amounted  to  a  small  competency. 
He  is,  therefore,  fairly  entitled,  in  addition  to  the  price 
of  simple  labor,  to  such  wages  as  would  pay  the  inter- 
est of  whatever  such  a  sum  would  have  amounted  to,  had 
it  been  used  with  ordinary  skill. 

Wages,  which,  in  addition  to  the  price  of  simple 
labor,  would  pay  the  interest  of  whatever  is  expended  in 
procuring  the  necessary  education,  would  hence  be  the 
lowest  cost  of  such  labor.  And,  it  is  manifest,  also, 
that  these  should  vary  with  the  cost  of  the  investment 
necessary  for  accpiiring  the  skill.  Thus,  the  wages  of 
him  who  was  obliged  to  sustain  himself  while  a  learner 
should  be  higher  than  those  of  him,  who,  though  he  earn- 
ed nothing,  was  fed  and  clothed  by  his  teacher.  The 
wages  of  him  who  was  obliged  to  pay  for  his  tuition, 
should  be  higlier  than  those  of  him,  who,  though  he  fed 
and  lodged  himself,  received  his  tuition  for  his  services. 
And,  if  such  wages  be  not  generally  paid,  such  labor 
will  not  ordinarily  be  produced.  Parents  who  have  cap- 
ital to  bestow  upon  their  children,  are  generally  desnous 
of  investing  it  to  the  best  advantage.  If  the  capital 
necessary  to  furnish  a  professional  education,  will  not  im- 
prove the  condition  of  a  child,  the  parent  will  not  invest 
the  money  in  a  professional  education,  but  will  employ  it, 
for  the  advantage  of  his  child,  in  some  other  way.  In 
this  manner,  the  supply  of  such  labor  w  ill  be  diminished, 
until  necessity  obliges  men  to  offer  greater  inducements 
to  produce  it. 


298  SUPPLY'   AND    DEMAND    FOR    LABOR. 

II.  Of  the  supply  and  demand  for  simple  and  educat- 
ed Labor. 

First.  Of  the  supply  of  Simple  Labor.  I  have  be- 
fore stated,  that  the  miniber  of  chihireii  born  does  not 
depend  either  upon  the  riches  or  the  poverty  of  the  par- 
ents ;  but  that  the  number  born,  is  generally  greater 
among  the  poor,  than  among  the  rich.  I  have  also 
stated,  however,  that  the  number  reared  does  de- 
pend, very  greatly,  upon  the  "circumstances  of  the  par- 
ents. When  tiie  wages  of  parents  are  barely  sufficient 
to  rear  two  children,  but  two  will  be  reared  ;  the  rest 
will  die  in  infancy.  When  wages  will  allow  of  rearing 
four,  four  will,  on  an  average^  be  reared  ;  and  so  on, 
until  we  arrive  at  the  natural  limit  of  fecundity  of  the 
human  race,  supposing  the  habits  of  the  parents  to  be 
virtuous,  industrious,  and  frugal.  Now,  as  simple  labor 
requires  nothing  but  healthy  human  beings,  it  is  manifest 
that  the  supply  of  this  labor  will  be  in  proportion  to  the 
demand  ;  that  is,  if  wages  be  such  as  to  indicate  an  ac- 
tual demand  for  a  large  increase  of  labor,  a  large  in- 
crease of  labor  will  be  the  result.  If  wages  be  such  as 
to  demand  only  a  diminished  amount  of  labor,  a  dimin- 
ished ninnber  of  laborers  will  be  reared.  And  this  re- 
sult will  take  place,  until,  on  the  one  hand,  it  reaches 
the  limit  of  the  natural  increase  of  the  human  race  ;  or 
until,  on  the  other  hand,  the  number  of  human  beings  be 
so  reduced  by  death  or  by  emigration,  that  it  can  be 
sustained  by  the  wages  which  industry  can  command. 

If  this  first  limit  be  reached;  that  is,  if  wages  be  so 
high  as  to  support  all  the  children  that  are  born,  and  yet 
there  be  a  want  of  laborers,  wages  will  rise  very  liigh; 
and  the  deficiency  will  generally  be  sui)plied  by  immi- 
gration. Laborers  from  less  favored  countries  will  then 
flow  in,  to  supply  the  demand.  The  overburdened 
population  of  an  older  country  will  be  drained  ofT,  and 
the  surplus  capital  of  a  new  country  will  be  profitably 
employed. 

2.    Such  is  the  case  with  simple  labor,  or  that  which 
is  produced  by  the  mere  multiplication  of  human  beings 
The  same  principles  apply,  in  substance,  to  that  sort  of 


SUPPLY    AND    DEMAND    FOR    LABOR.  20.0 

labor,  which  consists  of  industry,  directed  by  previously 
acquired  skill,  but  wiiich  re(juires  no  special  natural  en- 
dowment. In  this  case,  as  has  been  remarked,  if  the 
investment  made  in  education  will  atiord  sufficient  emol- 
ument, in  addition  to  that  obtained  by  simj)le  labor,  if 
will  be  produced.  If  this  additional  emolument  be  in- 
sufficient, it  will  not  be  produced;  that  is,  men  will  not 
be  educated  for  this  partieulur  occupation;  or,  if  they 
have  been  educated  for  it,  they  will  leave  it.  and  devote 
themselves  to  some  other  pursuit. 

S.  But,  it  frequently  happens,  that  not  only  an  educa- 
tion, but  also  peculiar  native  talent  is  necessary,  in  or- 
der lo  arrive  at  en^inence  in  a  particular  pursuit.  When 
this  is  the  case,  the  supply  is  limited  by  the  gift  of  the 
Creator,  and  cannot  be  increased  by  the  agency  ol 
man.  No  pecuniary  emolument  could  create  the  talent 
of  a  Milton  or  a  iShakspeare,  a  Cicero  or  a  Demos- 
thenes, a  Watt  or  a  Fulton.  Hence,  the  demand  for 
such  talent  being  great,  and  the  supply  limited,  and  by 
human  effort  incapable  of  increase,  the  exchangeable 
value  of  its  productions  is  frequently  great.  The  emol- 
uments of  Sir  Walter  Scott  were  princely.  It  not  un- 
frequently  happens,  however,  that  this  sort  of  talent  is  in 
advance  of  its  age,  and  its  value  is  not  appreciated  un- 
til after  the  death  of  its  possessor.  Although,  however, 
demand  cannot  create  unusual  genius,  yet  it  is  the  fact, 
that,  whenever  the  demand  is  greatest  for  any  particular 
talent,  then  that  talent  is  most  likely  to  arise.  The  rea- 
son I  suppose  to  be,  that,  in  proj)ortion  to  the  encour- 
agement which  it  receives,  the  less  is  the  liability  that 
any  portion  of  that  which  the  Creator  has  bestowed  will 
be  lost.  Military  talent,  which  is  commonly  held  in 
high  estimation,  seems  to  be  of  very  frequent  occurrence. 
A  nation  ha^  rarely  any  real  need  for  it,  without  produc- 
ing, in  a  short  time,  as  great  an  amount  of  it  as  can  be 
desired.  The  same  remarks  ajij)ly,  in  a  considerable 
degree,  to  the  talent  for  invention,  for  scientific  investi- 
gation, for  elo(juence,  and  many  others. 

SkcoiNdly.  Of  demand  for  Labor.  We  have  al- 
ready divided  laijor  into  two  kinds,  viz  :  I'irst,  Simple 


300  SUPPLY    AND    DEMAND    FOR    LABOR. 

labor^  comprehending,  under  this  term,  that  which  re- 
quires only  that  skill  which  every  person  may  easily  ac- 
quire; and,  secondly,  that  which  requires  some  peculiai 
talent^  and  is  perfected  only  by  long  and  expensive 
training.  We  shall  here,  as  above,  consider  these  sep- 
arately. 

I.  Of  Simple  Lahor^  and  that  xokich  requires  only 
such  skill  as  may  be  easily  acquired  by  all. 

This  is  the  sort  of  labor  required  to  produce  the  ne- 
cessaries of  life;  that  is,  labor  in  the  several  departments 
of  operative  industry.  For  this  labor,  the  desire  is  in- 
cessant and  universal.  Every  one  in  the  community 
needs,  at  every  hour  of  his  life,  the  results  of  that  labor 
which  produces  food,  clothing,  fuel,  and  shelter.  Unless 
these  can  be  procured,  the  human  being  will  die;  and, 
as  these  articles  perish  with  the  using,  the  demand  is 
not  only  imperative,  but  unremitting. 

Now,  such  being  the  fact,  he  who  possesses  capital, 
knows  that  if  he  can  transform  it  into  such  products,  he 
can  always  reasonably  anticipate  a  profit.  But  he  can- 
not transform  it  into  such  products,  without  labor. 
Hence,  as  incessant  and  imperative  as  is  the  demand  for 
the  necessaries  of  life,  so  incessant  and  imperative  must 
be  the  demand  of  the  capitalist  for  that  labor,  by  means 
of  which  alone  they  are  produced.  If  a  community 
need  clothing,  and  a  capitalist  have  all  the  means  for 
making  clothing;  and  want  nothing  but  workmen  to  ere 
ate  the  product;  just  in  proportion  to  the  demand  for 
clothing,  will  be  his  demand  for  the  workman,  by  whose 
agency  alone  this  demand  can  be  supplied,  and  his  cap- 
ital rendered  profitable. 

Such  being  the  fact,  there  must  always  be  a  demand 
for  such  labor;  hence,  when  there  is  any  capital,  such 
labor  will  always  bring  something.  The  rate  at  which 
it  will  be  paid  at  different  times,  and  in  diflerent  coun- 
tries, is  next  to  be  considered. 

We  have  already  stated  that  wages  are  the  result  of  a 
partnership,  formed  between  the  laborer  and  the  capi- 
talist, in  which  the  one  receives  a  portion  of  the  value 
created,  in  return  for  nis  labor;  and  tiie  other  liie  re- 


POPULATION    AND    WAGES.  301 

mainder,  in  return  for  the  use  of  his  capital.  Both  of 
these  parties  are  equally  necessary  to  each  oiher. .  If 
the  laborer  could  not  procure  work,  or  could  not  ex- 
change his  labor  for  some  value  wliich  he  created,  he 
must  starve.  If  the  capitalist  could  not  create  value 
from  the  cmj)loyment  of  his  capital,  he  must  starve  also. 
He  could  neither  eat,  nor  drink,  nor  wear  his  looms, 
spinning-jennies,  ships,  iron,  or  cotton.  Both,  there- 
fore, come  into  the  market  on  equal  terms;  each  needs 
the  product  of  the  other;  and,  under  these  circumstan- 
ces, they  will  each  receive  either  less  or  more,  ni  con- 
sequence of  the  conditions  under  which  the  exchange  is 
made. 

Every  capitalist  wishes  to  have  all  his  capital  united 
with  labor  f  since,  that  which  is  not  thus  united,  will  be 
useless  to  him  ;  nay,  it  will  generally  diminish  in  actual 
value.  On  the  other  hand,  in  a  given  state  of  the  arts, 
the  labor  of  a  single  man  can  be  applied  to  but  a  given 
amount  of  capital.  Hence,  the  number  of  laborers 
whom  any  single  caj)italist  will  require,  will  be  in  pro- 
portion to  the  amount  of  his  capital.  If  a  capitalist  of 
ten  thousand  dollars  require  ten  laborers,,  one  of  one 
hundred  thousand  dollars  will  require  one  hundred  labor- 
ers. And  so,  in  general,  the  greater  the  amount  of 
capital  employed  in  a  country,  the  greater,  of  course 
will  be  the  number  of  laborers  pmj)loyed. 

As  now,  every  capitahst  will  wish  to  employ  all  his 
capital,  if  the  number  of  laborers  be  insufficient  to  sup- 
ply the  demand,  there  will  be  a  competition  among  cap- 
italists, for  laborers,  and  they  will  olfer  higher  wages; 
that  is,  rather  than  have  any  portion  of  their  capital  use- 
less, they  will  offer  a  larger  share  of  the  profits  to  the 
laborer.  The  first  class  of  workmen  will  be  all  em- 
ployed at  a  high  price,  and  a  portion  of  the  second  class 
will  be  raised  one  grade,  in  order  to  sup])ly  the  demand 
The  second  class  will,  then,  be  still  more  insufficient  to 
supply  the  demand  for  their  description  of  labor,  and 
their  wages  will  rise,  and  the  increased  deficiency  be 
supplied  from  the  third  class.  And,  at  last,  those  who 
were  before  employed  only  at  simple  labor,  will  be 
26      • 


302  POPULATION    AND    WAGES. 

taught  and  employed  in  educated  labor;  and  thus  the 
whole  class  of  workmen  will  be  raised  one  grade  in  labor 
and  in  wages. 

And  the  reverse  will  take  place  in  the  opposite  case. 
Suppose  the  number  of  laborers  be  too  great  to  be 
employed  by  the  existing  amount  of  capital.  A  capital- 
ist, whose  capital  will  occupy  but  one  hundred,  cannot 
employ  one  hundred  and  fifty  laborers.  Hence,  there 
will  be  a  competition  among  laborers  for  work.  After 
as  many  of  the  first  class  have  been  employed  as  are 
needed,  there  will  remain  a  portion  of  them  out  of  work. 
These  must  fall  into  the  second  class,  and  receive  the 
second  rate  of  wages.  This  will  cause  an  excess  still 
greater  in  the  second  class  ;  their  wages  will  fall,  and  a 
greater  number  will  fall  into  the  third  class.  The  low- 
est class  will  thus  be  su|)pried  from  the  classes  above  it, 
and  it  must  betake  itself  to  simple  labor,  or  labor  of  the 
cheapest  kind.  While  many  of  those  whose  only  sup- 
port is  derived  from  simple  labor,  must  be  out  of  em- 
ployment, either  wholly  or  in  part;  that  is,  the  whole 
class  of  laborers  will  fall  one  grade,  and  their  wages  will 
depreciate  in  proportion.  Hence,  we  see,  that,  at  any 
given  time  and  place,  the  demand  for  labor,  and  the 
wages  of  labor,  will  be  in  the  proportion  to  the  ratio  that 
the  active  capital  of  a  country  bears  to  the  number  of 
laborers  in  that  country. 

But  provision  has  been  made,  in  our  physical  consti- 
tution, for  the  rapid  increase  of  the  human  race.  It  is  ca- 
pable of  doubling,  once  in  twenty-five  years,  as  it  is  seen 
to  be  the  case  in  the  United  Slates.  And  provision  is 
also  made  for  the  rapid  accumulation  of  capital.  The 
earth,  every  year,  if  it  be  properly  tilled,  and  if  capital 
be  properly  employed,  produces  more  than  its  inhabit- 
ants consume.  This  surplus  may  be  turned  into  fixed 
capitcil,  and  may  thus  give  employment  to  a  larger  num- 
ber of  laborers.  Hence  the  average  rate  of  wages  in 
any  country  for  a  number  of  years  taken  together,  must 
depend  upon  the  ratio  which  the  annual  accumulation  of 
capital  in  any  country,  bears  to  the  annual  increase  of 
human  beings.     If  wages  be  high,  and  capital  increase 


POPULATION    AND    WAGES.  303 

as  fast  as  the  liiiman  species  increases,  wages  will  for 
any  period  that  may  be  conteinplaied,  continue  as  they 
aie  at  present.  11'  wages  be  low,  and  capital  does  not 
increase  faster  than  the  human  race,  they  will  continue 
low.  If  the  increase  of  caj)ital  be  more  rajjid  than  the 
natural  increase  of  the  human  race,  wages,  however 
high,  will  rise,  until  they  be  so  high  that  the  production 
can  yield  no  profit.  The  deficiency  would  then  be  sup- 
plied by  foreigners,  who  would  immigrate  to  the  moie 
favored  country.  If  the  increase  of  capital  be  less 
rapid  than  that  of  the  human  race,  the  price  of  wages 
will  fall,  distress  in  the  working  classes  will  ensue,  and 
they  must  either  emigrate  or  starve. 

If  this  be  so,  it  will  be  evident  that  the  laws  regulat- 
ing wages  depend  upon  circumstances  beyond  the  power 
of  capitalists  or  laborers.  The  rich  cannot  lefuse  to 
employ  laborers  without  loss,  and  the  workman  cannot 
refuse  to  labor  without  loss.  And  the  competition 
which  naturally  exists,  in  a  free  country,  is  all  that  is 
necessary  to  bring  wages  to  their  proper  level  ;  that  is, 
to  all  that  can  be  reasonably  paid  for  them.  Hence 
combinations  among  capitalists  or  laborers  are  not  only 
useless,  but  expensive,  and  unjust.  They  attempt  to 
change  the  laws  by  which  remuneration  is  governed, 
and  they  must,  by  conserpience,  thus  be  useless.  The) 
expose  capital  and  labor  to  long  periods  of  idleness,  and 
thus  are  expensive.  They  assume  the  power  of  depriv 
ing  the  capitalist  of  his  right  to  employ  laborers,  and  the 
laborer  of  his  right  to  dispose  of  his  labor  to  whomso- 
ever and  on  what  terms  soever  he  pleases,  and  hence 
they  are  unjust.  And  combinations  of  this  kind  aie  as 
unjust  when  undertaken  by  the  rich  as  by  the  poor. 

Plence  we  see,  that  the  prosperity  of  a  nation  docs 
not  depend  sim[)ly  upon  the  absolute  amount  of  its  capi- 
tal, but  upon  the  ratio  which  its  capital  bears  to  its  pop- 
ulation, and  the  ratio  which  is  maintained  between  the 
increase  of  both.  If  the  increase  of  capital  be  so  rapid 
as  to  allow  the  simple  laborer  sufficient  wages  to  sujtport 
and  rear  as  many  children  as,  under  ordinary  circum- 
stances, form  a  humait  family,  there  will  be  no  distress 


304  POPULATION    AND    WAGES. 

in  any  class  ;  all  will  be  well  supported  ;  there  will  be 
no  beggars  from  necessity  ;  and  every  one  will,  enjoy 
the  advantages  arising  from  hi"s  skill  and  his  education. 
If  the  increase  of  capital  be  more  rapid  than  iliis, 
every  one  will  have,  besides  support  and  maintenance} 
many  of  the  conveniences  of  life  ;  and  a  large  proportion 
will  be  continually  rising  from  a  lower  to  a  higher  grade 
of  employment.  When  the  increase  of  capital  is  less 
rapid  than  the  ordinary  increase  of  the  human  race,  there 
will  be,  in  the  lowest  class,  continual  distress  ;  children 
will  die  in  great  numbers  ;  the- average  duration  of  hu- 
man life  will  be  shortened  ;  and  many  persons  will  be 
sinking  from  the  higher  into  the  lower  grades  of  employ- 
ment and  comfort. 

The  former  seems  to  be  the  condition  of  this  coun- 
try. Here  distressing  j)overty,  or  poverty  which  short- 
ens life,  except  it  arise  from  intemperance,  or  from  some 
form  of  vice  or  indolence,  is  very  rare.  The  common 
laborer,  if  industrious,  virtuous,  and  frugal,  may  not  only 
support  himself,  but,  in  a  few  years,  accumulate  a  valua- 
ble little  capital.  And  notwithstanding  the  great  immi- 
gration of  foreigners,  the  wages  of  labor  are  annually 
rising.  Hence,  it  is  evident,  that  the  increase  of  capital 
mofe  than  keeps  pace  with  the  natural  and  imported  in- 
crease of  the  human  raCe. 

In  Ireland,  the  case  is  reversed.  There,  the  lowest 
classes  are,  and  have  been  for  a  long  period,  in  the  most 
abject  poverty.  Multitudes  of  them  are  said  to  die, 
annually,  of  famine.  He  is  considered  in  tolerable 
circumstances,  who  is  able  to  furnish  his  family  with  a 
hovel,  with  one  full  meal  of  potatoes  a  day,  and  with  a 
sufficient  supply  of  straw  to  be  spread  upon  the  earthy 
floor  for  bedding.  The  reason  I  suppose  to  be,  that,  in 
addition  to  the  deplorable  ignorance  of  the  people,  the 
land  is  owned  in  England  ;  and  the  rents,  collected  by 
rapacious  underlings,  is  annually  carried  away  and  spent 
in  England,  instead  of  being  turned  into  fixed  capital  in 
Ireland.  Hence,  the  annual  increase  adds  but  little  to 
the  capital  of  the  country  ;  and  the  people  must  starve 
or  emigrate. 


POPULATION    AND    WAGES.  305 

This  subject  illustrates  llie  connexion  between  capita] 
and  population,  i'opulatiou  always  follows  capital.  It 
increases  as  caj)iial  increases  ;  is  stationary  when  capital 
is  stationary  ;  and  decreases  when  caj)ital  decreases. 
And  hence,  there  seems  no  need  of  any  other  means  to 
prevent  the  too  rapid  increase  of  population,  than  to  se- 
cure a  correspondent  increase  of  capital,  by  which  that 
population  may  be  supported. 

iSeveral  conclusions  naturally  belong  to  this  part  of 
this  subject,  to  which  it  may  be  proper  in  this  place  to 
allude, 

1.  If  the  above  reasonings  be  correct,  we  see  the 
great  importance,  both  of  individual  and  national  frugali- 
ty. It  is,  by  many  persons,  supposed,  that  luxury  and 
expensiveness  in  individuals  are  specially  useful  to  the 
poor  ;  and  that  economy  and  frugality  are  injurious  to 
them.  We  see,  however,  that  nothing  could  be  more 
evidently  erroneous.  He  who  consumes  upon  horses, 
and  dogs,  and  equipage,  ten  thousand  dollars'  worth  of 
value,  is  annually  putting  out  of  existence  a  value, 
which,  if  united  with  industry,  might  support  several 
families  in  comfort ;  and  he  is  thus  rendering  it  impossi 
ble,  that  so  many  can  be  supported.  He  who  saves 
this  sum  by  frugality,  and  invests  it  in  some  protiialile 
enterprise,  employs  the  persons  whom  it  will  support  the 
first  year;  and,  hy  so  doing,  is  enabled  to  support  a. 
larger  number  the  next  year,  and  so  on  indefinitely. 
The  one  is  destroying,  forever,  a  fund  for  the  support 
of  industry  ;  the  other  is  annually  rendering  that  fund 
larger  and  more  productive. 

2.  The  same  is  true  of  nations.  The  annual  revenue 
of  a  nation,  must  of  course  be  derived  from  the  annual 
revenues  of  the  people.  If  a  man,  this  year,  pn}  one 
hundred  dollars  in  taxes,  he  has  precisely  ninety  doilars 
less  to  unite  with  the  industry  of  the  next  year,  than  he 
woidd  have,  if  he  paid  only  ten  dollars.  And  thus,  if 
the  annual  expenditures  of  a  nation  be  fifty  millions, 
these  fifty  millions  are  just  so  much  abstracted  from  the 
fund  which  has  been  collected  during  that  year,  for  the 
purpose  of  supporting  the  addition  which  this  }  ear  has 

26* 


306  POPULATION    AND    WAGES. 

made  to  the  number  of  the  human  race.  If  the  whole 
revenue  of  the  nation  were  barely  sufficient  to  employ 
and  support  the  annual  increase  of  its  inhabitants,  those 
who  would  have  been  supported  by  these  additional  fifty 
millions,  must  perish.  tSuch  is  the  natural  and  necessa- 
ry result  of  national  prodigality. 

I  do  not,  however,  by  any  means  intend  to  assert^ 
lliat  taxes  are  unnecessary.  A  government  necessarily 
involves  expense.  And,  if  the  government  be  well  ad- 
ministered, no  mode  of  expenditure  yields  a  richer  or 
more  valuable  product  than  taxes.  What  1  have  to  say, 
is  merely  this  ;  that  while  all  the  expense  necessary  to 
good  government  should  be  met,  and  met  cheerfully  and 
liberally,  yet  expense  beyond  this  is  a  benefit  to  no  one  ; 
it  diminishes  the  comforts  of  all,  and  destroys  the  lives 
of  multitudes.  Hence,  we  see  the  evil  of  any  form  of 
government,  which,  by  necessity,  involves  great  and  un- 
necessary expenditure.  Hence,  also,  the  evil  of  laws 
of  entail,  and  of  all  other  arrangements  by  which  im- 
mense amounts  of  capital  are  accumulated  in  the  hands 
of  single  individuals,  or  of  families,  in  perpetuity.  In 
this  manner,  the  annual  productiveness  of  a  country  is 
greatly  decreased,  and,  in  consequence,  the  annual  reve- 
nue of  the  whole,  is  by  the  difierence  lessened. 

3.  Of  all  the  modes  of  national  expenditure,  the  most 
enormous  is  that  of  war.  In  the  first  plate,  the  ex- 
pense of  the  munitions  of  war  is  overwhelming.  In  the 
next  place,  the  most  athletic  and  vigorous  laborers  must 
be  selected  for  slaughter.  Of  these  the  time  and  labor 
are  wholly  unproductive.  The  operations  of  industry, 
in  both  belligerent  nations,  are  thus  greatly  paralyzed. 
The  destruction  of  property,  in  the  district  through 
which  an  army  passes,  is  generally  very  great.  All  this 
must  be  taken  from  the  earnings  of  a  people  ;  and  is  so 
much  capital  absolutely  destroyed,  from  which  multi- 
tudes might  have  been  reared,  and  have  lived  in  pros- 
perity. * 

*  To  illustrate  tlie  vast  exponditur&of  war,  I  nrre  insert  an  esti- 
mate of  tlie  expenses  of  sfinie  of  tlie  latest,  wars.  1  do  not  vouch  for 
ita  entire  accuracy,  but,  I  presume,  it  will  be  lound,  in  general,  cor 


POPULATION    AND    WAGES.  307 

If  the  considerations  which  have  been  adduced  above 
be  c Direct,  there  is  no  need  of  seeking  any  further  fot 
the  cause  of  that  distress  among  the  lower -elasses,  of 
which  we  hear  so  frequently  in  Europe.  If  the  capital 
which  a  bountiful  Ore? tor  has  provided  for  the  suste- 
nance of  man,  be' dissipated  in  wars,  his  creatures  must 
perish  for  the  want  of  it.  Nor  do  we  need  any  abstruse 
theories  of  population,  to  enable  us  to  ascertain  in  what 
manner  this  excess  of  population  may  be  prevented. 
Let  nations  cultivate  the  arts  of  peace.  Let  them  re- 
duce the  unnecessary  expenses  of  governments.  Let 
them  abolish  those  restrictions  which  fetter  and  dispirit 
industry,  by  diminishing  the  inducements  to  labor.     Let 

rect.     It  is  from  one  of  the  publications  of  the  Teace  Society,  aud 
seems  to  be  made  up  from  authentic  documents. 

GUKAT    BRITAIN 

War  expenses,  for  the  year  1815,       .         .         .  £54,317,707 

Interest  on  debt,  for  tliat  year,       .....  6 '200,000 


£60,517,767 
Military  and  naval  expenses,  for  1818,  .         .        .         15,155,000 

Difference  of  the  two  years, 45,:^62,7()7 

Equal  to         .         .        ;        .        •        $201,362,898 


Military  expenses  for  1809,        .  .         .         francs  656,500,000 

Contributions  on  foreign  nations,         ....         330,000,000 


Total, 986,500,000 

In  1817,  the  military  expense  was,      ....  228.000,000 


Expense  of  one  year's  war, 758.500,000 

Equal  U  ....         $  142,218,750 

The  estimated  cost  to   Great    Britain,    of   twenty-two 

years"  war, £720.000  000 

Equal  to     .         - f  3.2(10,000,000 

War  expense  for  France,  for  same  period,  .         .         .      3,130.0(10,000 

Austria,  about  .  .  .         2,000, 000,(100 

Three  years  war  of  the  United  States,  .        .        120,000,000 


8,450.000,000 
Expense  af  othei  European  powers,         .         .         .        4,559,000.000 


13,000,000,000 


This  is  nothing  but  the  national  expense,  without  estimating  the 
prodigious  and  incalculable  losses  to  indiviuuals. 


308  POPULATION    AND    WAGES. 

them  foster  the  means  by  which  the  productiveness  of 
labor  may  be  increased,  and  the  annual  gifts  of  the  Cre- 
ator will  §|p  accumulate,  that  the  means  will  be  provided 
for  the  support  of  all  the  human  beings  that  are  annually 
brought  into  the  world.  As  soon  as  this  accumulation 
bears  a  suitable  ratio  to  the  number  of  inhabitants,  we 
shall  hear  no  more  of  the  ev  Is  of  excess  of  population. 
Et  is  vain  to  throw  away  the  food  of  a  million  of  people 
m  a  single  day,  and  then  be  astonished  that  a  million  of 
people  are  starving  for  the  want  of  it. 

Hence  we  learn  the  economical  evils  of  every  form 
of  vice  ;  as,  for  instance,  of  intemperance.  The 
money  spent  in  intemperance,  is  so  much  absolute  waste 
of  capital.  This  is,  of  itself,  in  most  civilized  coun- 
tries, enormous.  But,  besides  this,  it  unfits  the  individ- 
ual for  labor  ;  it  is  the  author  of  numerous  diseases, 
both  in  parents  and  in  children.  It  is  the  cause  of  al- 
most all  the  crime  and  pauperism  in  the  community. 
All  these  together,  if  they  could  be  correctly  estimated, 
would  form  a  total  amount  which  would  seem  almost  in- 
credible ;  and  they  are  altogether  exclusive  of  that  loss 
of  social,  intellectual,  and  moral  happiness,  which  re- 
sults from  this  vice. 

To  sum  up  what  has  been  said.  We  see  that  the 
demand  for  the  labor  employed  in  the  production  of  the 
necessaries  of  life  ;  and,  of  course,  the  wages  of  labor, 
must  be  in  proportion  to  the  ratio  which  the  amount  of 
capital  in  any  given  community,  holds  to  the  number  of 
laborers  ;  and  to  the  ratio  which  the  accumulation  of 
capital  bears  to  the  increase  of  the  human  race.  And 
these  being  at  any  time  fixed,  wages  will  rise  or  fall,  as 
this  ratio  varies.  If  capital  be  increasing  more  rapidl} 
than  humtin  beings,  wages  will  rise.  If  it  be  not  in- 
creasing so  fast,  wages  will  fall.  And  if,  from  any  sud- 
den change  in  the  aliairs  of  a  country,  this  ratio  be  sud- 
denly affected,  wages  will  be  affected  accordingly. 

II.  1  now  come  to  consider  that  sort  of  labor,  which 
requires  special  and  expensive  education,  and  some  pe- 
culiar natural  endowment  ;  such,  for  instance,  is  the 
labor  which  is  bestowed  upon  the  fine  arts,  and  which  is 
employed  irr  some  of  the  professions. 


LABOR    IN    THE     FI>E    ARTS.  S09 

1.  Tht  desire  for  this  labor  varies  with  the  age  of  a 
society.  In  the  beginnings  of  a  nation,  when  every  one 
IS  interested  in  providing  llie  means  of  subsistence,  there 
is  httle  tin)e  or  capital  to  spare  for  the  cultivation  of  a 
taste  for  the  fine  arts.  And,  at  a  yet  more  advanced 
period,  when  wages  for  labor  are  universally  high,  and 
every  one  may  reasonably  cherish  the  hope  of  attaining 
to  independence,  the  love  of  gain  is  too  absorbing  a  pas- 
sion to  allow  of  the  development  of  any  habit  that  does 
not  conduce  to  pecuniary  acquisition.  It  is  only  in  the 
later  and  more  advanced  stages  of  society,  where  hered- 
itary fortunes  have  been  built  up,  and  where  accumulated 
property  gives  ojiportunity  for  leisure  and  refinement, 
that  much  desire  is  manifested  for  those  productions  of 
the  fine  arts,  which  are  considered  the  offspring  o-f  the 
rarest  and  most  highly  gifted  talent. 

2.  The  ability  to  gratify  this  desire,  depends  also 
upon  the  form  of  social  organization.  The  productions 
of  the  fine  arts  are  generally  very  costly.  Hence, 
where  property  is  nearly  equally  divided,  where  no  one 
is  poor,  though  no  one  may  be  exorbitantly  rich,  such 
productions  could  have  but  few  purchasers.  Whether 
wages  were  high  or  low,  whether  there  were  no  beggars 
or  whether  there  were  ten  thousand  beggars,  would  have 
no  effect  upon  the  probability  of  the  sale  of  a  statue, 
which  cost  one  hundred  thousand  dollars.  The  demand, 
is  of  necessity,  limited  to  the  wealthy  ;  and  that  form  of 
social  organization  which  is  most  favorable  to  the  accu- 
mulation of  large  estates,  and  to  the  retaining  of  them 
in  the  hands  of  single  individuals,  will  always  be  most 
favorable  to  the  cultivation  of  the  fine  arts.  In  this 
country,  where  we  have  few  beggars,  and  where,  but  for 
intemperance  and  vice,  we  should  have  none,  a  first-rate 
sculptor  or  painter  would  starve.  In  many  of  the  coun- 
tries of  Europe,  where  the  poor  are  .Vequently  famish- 
ing, and  where  a  large  proportion  of  the  population  are 
beggars,  you  may  frequently  find,  in  the  gallery  of  a 
single  gentleman,  a  finer  collection  of  paintings,  than 
could  be  made  from  aU  the  pictures  in  the  whole  L'nited 
States.  Hence,  I  think  that  the  prospect  for  the  arts, 
in  this  coiuitry,  is  by  no  means  encouraging. 


310  CAUSES    OF    DIFFERENCE    OF    WaGES. 


SECTION   II. 

OF  THE  SPECIAL  CIRCUMSTANCES  BY  WHICH,  IRRE- 
SPECTIVELY OF  THE  INFLUENCE  OF  CAPITAL,  THE 
WAGES     OF    LABOR    ARE    AFFECTED. 

In  the  preceding  section,  I  have  endeavored  to  show 
in  what  manner  wages,  or  the  price  of  labor,  are  aflected 
by  capital.  The  general  principle  there  illustrated,  is, 
that  wages  will  be  high,  when  the  proportion  of  capital 
to  labor  is  great ;  and  low,  when  the  proportion  of  cap- 
ital to  labor  is  small  :  and  that  wages  will  be  rising  or 
falling,  as  this  proportion  of  capital  to  labor  is  increasing 
or  diminishing.  On  this  principle,  I  suppose  that  the 
difference  of  wages,  in  different  countries,  under  the 
same  physical  conditions,  may  be  explained. 

The  same  principle  may  be  carried  a  step  further. 
Whenever,  in  any  country,  capital  is  removed  from  one 
kind  of  employment  to  another,  the  wages,  in  that  form 
of  labor  to  which  capital  is  transferred,  will  be  raised. 
Thus,  if  a  people  find  it  for  their  interest  to  employ  their 
capital  in  manufactures,  instead  of  navigation,  the  wages 
of  manufacturers  will  rise,  and  those  of  sail^ors  will  fall. 
This  will  continue,  until  the  demand  for  manufacturing 
labor  is  supplied.  But,  when  the  current  is  orice  set  in 
any  direction,  it  frequently  continues  to  move,  after  the 
force  which  was  originally  applied,  has  ceased.  Hence, 
it  will  frequently  happen,  that  a  change  of  this  sort  wil' 
abstract  from  navigation  too  large  a  number  of  labor 
ers,  &o  that  there  will  not  be  a  sufficient  supply  to  meet 
even  the  diminished  demand.  In  this  case,  the  wages 
of  seamen  will  rise  again,  somewhat  above  the  proper 
average. 

]^ut,  supposing  all  these  circumstances  to  be  adjusted, 
there  will  yet  remain  others  of  a  different  kind,  to  affect 
the  wages  of  labor.  We  do  not  find  that  the  wages  of 
all  laborers  are  the  same,  whether  labor  be  high  or  low, 
and  whether   the  productiveness  of  labor   be    great  or 


CAUSES    OF    DIFFERENCE    OF    WAGES.  311 

small.  A  captain  receives  higher  wages  than  a  sailor  , 
a  master  manufacturer,  higher  wages  than  his  journey- 
man ;  and  a  merchant,  higher  wages  than  his  clerk. 
The  circumstances  which  cause  these  differences,  re.- 
main  now  briefiy  to  be  noticed. 

1.  The  price  of  labor  is  affected  by  the  ease  or  diffi- 
culty, the  ])leasure  or  pain,  of  the  emj)loyment. 

WJien  the  employment,  for  instance,  retpiires  great 
muscular  efi'ort,  the  number  of  persons  who  can  accom- 
[)lish  it,  is  comparatively  small.  This  diminishes  the 
su))ply,  and,  of  course,  increases  the  price.  When 
this  is  the  case,  as  men  are  not  usually  attracted  by  the 
pros|)ect  of  hard  labor,  a  smaller  number  a])))ly  for  this 
kind  of  employment.  This  still  further  diminishes  the 
supply.  Hence,  the  price  will  rise,  as  the  wages  must 
be  increased  sufficiently  to  overcome  this  repugnance. 
On  the  contrary,  when  the  labor  is  easy,  the  number  of 
persons,  both  able  and  willing  to  perform  it,  is  In- 
creased ;  thus,  the  supj^ly  is  large,  and  wages  fall  in 
proportion. 

The  same  effect  is  produced  by  the  general  estima- 
tion of  the  pleasantness  or  unpleasantness  of  the  em- 
ployment. Any  kind  of  industry,  which,  from  necessity, 
is  uncleanly,  commands  higher  wages  than  one  which 
can  be  performed  without  interfering  with  personal  neat- 
ness. One  which  is  considered  disgraceful,  can  be 
supplied  with  laborers,  only  by  paying  an  unusual  price. 
Tlie  business  of  a  public  executioner,  though  not  diffi- 
cult, is  disagreeable,  and  generally  considered  disgrace- 
ful ;  and  hence,  in  countries  where  it  is  made  a  distinct 
profession,  it  commands  high  wages.  The  labor  in  the 
learned  professions,  is  considered  honorable  ;  and,  ther'j- 
fore,  it  is  less  highly  recompensed  than  the  same  degrt;e 
of  labor  and  skill  in  other  employments. 

2.  Wages  are  affected  by  the  skill  required  in  -per- 
forming the  operation.  This  arises  from  two  circum- 
stances :  First,  skill  can  be  accpiired  oidy  by  practice 
and  education.  This,  as  has  been  explained,  is  in  itself 
costly,  and  is  an  investment,  for  which  the  poss3ssor 
justly  receives   an  emolument.     And,  secondly,  unusua' 


312  CAUSES    OF    DIFFERENCE    OF    LABOR. 

skill,  generally  supposes  some  unusual  endowment.  But 
in  proportion  to  the  rarity  of  the  endowment,  must  be 
the  smallness  of  the  supply,  and,  of  course,  the  rise  of 
price  which  must  be  paid  for  the  product. 

3.  The  confidence  reposed.  Wherever  a  great  amount 
of  capital  is  employed,  it  must,  to  a  very  considerable 
degree,  be  placed  in  the  power  of  some  one  or  more 
agents.  Hence,  if  this  power  be  abused,  or  used  un- 
wisely, the  whole  is  liable  to  be  lost.  If  the  manager 
be  careless,  he  may  destroy  it  by  negligence  ;  and  if  he 
be  dishonest,  he  may  convert  it  to  his  own  emolument. 
Now,  this  union  of  judgment  with  incorruptible  integrity, 
is  absolutely  necessary  in  many  of  tbe  operations  of  pro- 
duction. But,  such  a  union  is  rarely  to  be  found. 
Hence,  while  the  demand  is  imperative,  the  supply  is 
small.  On  this  account,  though  the  wages  of  such  per- 
sons are  high,  it  is  generally  found  more  economical  to 
employ  them,  at  any  price,  than  to  intrust  important  af- 
fairs to  the  incompetent  and  the  vicious.  This  is  ono' 
of  the  rewards,  which,  in  the  course  of  human  events, 
God  bestows  upon  wisdom  and  virtue. 

4.  Certainty  or  uncertainty^  constancy  or  inconstancy 
of  employment.  Division  of  labor  requires  that  a  man 
devote  himself  exclusively  to  a  single  employment,  and, 
therefore,  that  his  whole  emolument  be  derived  from  that 
emjiloyment.  Hence,  when  the  opportunities  of  em 
ployment  are  rare,  the  wages  for  each  particular  opera- 
tion must  be  greater  ;  since  we  must  pay,  not  only  for 
the  time  actually  employed,  but  also  for  that  time  which 
is  lost  to  the  laborer,  while  waiting  for  emjiloymcnt. 
We  pay  more  money  for  riding  a  mile  in  a  hackney- 
coach,  than  for  riding  the  same  distance  in  a  stage- 
coach ;  because  the  hackney-coachman  may  stand  half 
a  day  in  waiting,  before  he  finds  another  customer.  For 
the  same  reason,  allhough  horse  keej)ing  is  higher  in  the 
city  than  in  a  country  town,  you  pay  less  money  for 
coach  hire  in  the  former  case,  than  in  the  latter,  because 
of  the  greater  steadiness  of  the  employment.  Thus, 
also,  when  a  trade  can  be  exercised  for  only  a  part  of 
the  year,  as  in  the  case  of  a  brick-layer,  you  pay  to  the 


CAUSES     OF    DIFFERENCE    OF    LABOR.  313 

laborer  higher  wages  ;  because  he  must  receive  enough 
to  compensate  him  for  the  time  in  which  he  is  obhged  to 
he  idle. 

5.  Another  circumstance  which  affects  the  price  of 
wages,  is  the  certainty  or  uncertainly  of  success.  In 
most  of  the  ordinary  avocations  of  life,  if  a  man  acquire 
the  requisite  skill,  he  will  invariably  find  emj)loyment. 
In  the  })rofessions,  it  is  not  so.  Those  who  have  pre- 
pared themselves  at  great  exj)cnse  for  the  practice  of  a 
profession,  unable  to  find  employment,  son^etimes  relin- 
quish it  for  another  pursuit.  When  such  a  risk  exists, 
the  wages  of  labor  shoidd  be  greater  ;  for  the  laborer  is 
entitled  to  a  remuneration  for  the  risk  of  this  loss  of  time 
and  of  capital. 

These,  I  believe,  are  the  principal  circumstances  on 
which,  irrespectively  of  the  influence  of  capital,  the 
price  of  labor  depends.  It  will  be  at  once  seen,  that 
they  are  susceptible  of  very  great,  variety  of  modifica- 
tion, and  combination  ;  and  that,  frequently,  several  of 
them  must  be  taken  into  the  account,  in  order  to  exj)lain 
the  reason  of  the  high  or  low  price  of  any  particular 
form  of  labor.  I  think,  however,  that  by  such  combi- 
nation, the  various  phenomena  of  wages  may  be  gener- 
ally explained. 

The  preceding  remarks  are  intended  to  apply  to  those 
cases,  in  which  the  individual  is  supported  wholly  by 
his  own  labor.  When  an  individual,  or  a  class  of  in- 
dividuals, have  any  other  means  of  support,  the  price 
of  labor,  of  course,  falls,  and  can  be  subjected  to  no 
general  rule.  Thus,  a  large  portion  of  the  laboring 
class  of  females  are  supported,  in  part,  by  their  rela- 
tives ;  some  of  them  receiving  house-rent,  others,  both 
house-rent  and  food,  for  nothing.  Hence,  they  are  en- 
abled to  labor  for  a  price,  far  less  than  the  actual  cost. 
This  is  one  reason  why  the  price  of  female  labor,  espe- 
cially of  that  labor  whi-ch  requires  but  little  skill,  and 
which  can  be  done  at  home,  is  so  low.  Another  rea- 
son is,  that  the  customs  of  society  restrict  the  modes  of 
production  in  which  female  labor  may  be  employed 
Hence,  in  these  modes  of  production,  the  supply  of  la 
27 


314  CAUSES     OF    DIFFERENCE     OF    LABOR 

bor  U  greater  than  the  demand.  Hence,  also,  the  es 
tabhshment  of  a  manufactory,  or  the  introduction  of  anj 
kind  of  labor,  which  furnishes  a  new  mode  of  female 
employment,  advances  the  price  of  female  labor.  Tins, 
also,  is  the  reason  why  the  labor  performed  in  nunneries, 
monasteries,  and  state  prisons,  is  sold  below  the  market 
price.  The  fact  is,  that  the  laborers  are  supported,  ei- 
ther in  whole  or  in  part,  by  a  separate  fund  ;  and  hence, 
there  is  no  nuUiral  price  for  their  products,  fince  it  is 
act  regulated  by  the  cost. 


CHAPTER  SECOND. 

THE    PRICE    OF    MONEY,    OR    INTEREST. 


SECTION  I. 

OF    THE    BENEFIT    OF    CAPITAL    TO    THE    LABORER. 

Having,  in  the  preceding  chapter,  endeavored  to  il- 
lustrate the  principles  which  regulate  the  rate  of  wages, 
we  now  proceed  to  illustrate  those  which  regulate  the 
rate  of  interest,  or  the  price  of  capital. 

We  have  already  stated,  that  when  two  persons  were 
engaged  in  creating  a  product,  a  part  of  the  profit  be- 
longed to  the  labor,  and  a  part  to  the  capital.  Let  us 
first  consider  the  benefit  of  capital  to  the  laborer. 

Su])|)ose  a  hiborer  to  be  endowed  with  health,  and 
al>o  w  iili  ?kill  sufficient  to  perform  an  operation  in  any 
mode  of  production.  His  power  is  made  up  of  two 
thiniis  ;  first,  mere  muscular  force  ;  and,  secondly,  skill. 
By  the  one,  he  is  enabled  to  exert  mere  brute  force,  as 
in  lifting,  carr}inir,  or  drawini,^.  By  the  second,  he  is 
enabled  to  avail  himself  of  the  use  of  natural  agents  ; 
for  skill  in  production  is  little  else  than  this  ability.  But 
it  is  evident  that  his  labor  of  the  first  kind,  is  vastly  less 
productive  than  that  of  the  second  kind,  as  the  simple 
labor  of  a  man's  hands  is  less  productive  than  that  labor 
which  is  employed  in  directing  the  agents  of  nature. 

Suppose,  now,  a  man  entirely  deprived  ot  the  use  ot 
cajiital  ;  his  labor  must  be  wholly  of  the  first  kind  ;  of 
course,  it  must  be  of  the  least  productive  quality,  and  it 
must  earn  the  lowest  rate  of  wages.  Suppose  a  black- 
smith, of  ever  so  great  skill,  destitute  of  forge,  hammer, 
anvil,  and  of  all  his  tools,  •'nd  also  of  iron  upon  which  tc 


316       BENEFIT    OF    CAPITAL     TO    THE    LABORER. 

employ  them  ;  he  can,  hi  no  manner,  avail  himself  of  his 
skill,  or  of  the  use  of  the  natural  agents  with  which  he 
is  acquainted,  and  he  must  either  perish  or  else  earn  his 
livelihood  by  simple  labor  ;  that  is,  by  the  putting  forth 
of  mere  brute  force,  without  any  benefit  from  his  skill, 
though  it  be  ever  so  great.  But,  let  some  one  loan  him 
a_shop  and  tools,  with  iron  and  cdar~su1Ticienf TcTcai  17 
on  his  business,  and  he  can,  at  once,  avail  himself  of 
his  skill ;  that  is,  of  the  use  of  those  natural  agents, 
with  which  he  is  acquainted.  His  labor  will  now  be- 
come vastly  more  productive  ;  that  is,  he  can,  in  a  given 
time,  create  a  vastly  greater  amount  of  value  than  be- 
fore, and  will,  of  course,  receive  a  much  larger  recom- 
pense. If  his  simple  labor  were  worth  one  dollar  per 
day,  his  labor  and  skill  will  now  probably  be  worth  at 
least  two  dollars  ;  that  is,  the  capital  which  he  uses,  has 
at  least  doubled  his  wages.  This,  at  the  rate  of  three 
hundred  working  days  in  a  year,  would  be  equal  to  three 
hundred  dollars,  which  he  receives  for  the  use  of  tiie 
capital  which  was  loaned  to  him.  Suppose  that  this 
capital  were  worth,  originally,  five  hundred  dollars  ;  and 
that  he  paid  for  the  use  and  wear  and  tear  of  it,  ten  per 
cent,  per  year;  he  might  then  pay  fifty  dollars  for  the  use 
of  it,  and  have  two  hundred  and  fifty  dollars  nett  profit, 
over  and  above  the  wages  which  his  simple  labor  could 
earn.  In  two  years,  he  might,  besides  paying  the  inter- 
est, pay  for  the  whole  capital,  and  thus  own  it  himself. 
He  would  then  be  entitled  to  all  the  profit  derived 
from  the  three  several  sources  :  first,  his  labor ;  second- 
ly, his  skill ;  and,  thirdly,  the  use  of  the  capital,  upon 
which  his  labor  was  employed. 

I  have,  in  the  above  case,  supposed  the  laborer  to 
borrow  the  shop,  tools,  and  materials.  Tlris  is  not  the 
ordinary  way  in  which  capital  is  borrowed.  It  is  much 
more  common,  and  much  more  convenient  for  him,  who 
wishes  to  borrow  the  capital  with  which  to  employ  his 
skill,  to  borrow  it  in  the  form  of  money,  which  he  im- 
mediately transforms  into  th:)t  kind  of  capital,  which  his 
occnpatic  ;i  rccjuii-es.  Hence,  contracts  of  this  kind  are 
always   estimated    in   money.       And   hence,    interest   is 


HENEFIT    OF    CAPITAL     TO    THE    LABORER.       ol  i 

cominonlv  called  the  price  of  money.  It  is  c\  ident, 
however,  that  it  is  not  llie  money.,  but  the  capital.,  which 
is  wanted  ;  because,  as  soon  as  the  man  obtains  the 
money.,  he  at  once  exchang;es  it  for  capital.  This, 
therefore,  should  always  be  borne  in  mind,  that  when  we 
speak  of  the  price  of  money.,  we  mean  the  piice  of  cap- 
ital., for  which  the  money  is  always  exchanged. 

Hence  we  see,  that  the  laborer  may  derive  very  great 
Denefil  from  the  loan  of  money  ;  that  is,  of  capital.  He 
is  thus  enabled  to  employ,  advantageously,  all  his  skill. 
and  thus,  a  loan  for  a  few  years  is  very  frequently  the 
commencement  of  a  fortune.  And  hence  we  see,  as  we 
liave  said  before,  how  very  absurd  is  the  prejudice  so 
commonly  excited  against  money-lenders,  and  money- 
lending  institutions.  Were  there  no  money-lenders, 
there  could  be  no  money-borrowers  ;  and  were  there  no 
money-borrowers,  the  industrious  artisan  would  surely  be 
the  greatest  sufferer.  It  is  not  denied  that  the  money- 
lender, loans  for  his  own  advantage.  But,  I  do  not  see 
why  it  is  any  more  odious  for  one  man  to  lend  for  his 
own  advantage,  than  for  another  man  to  borrow  for  his 
own  advantage.  It  is  not  pleaded,  that  the  one,  any 
more  than  the  other,  is  benevolent.  This  is  quite  anoth- 
er question.  All  that  is  pleaded  is,  that  both,  in  so  far 
as  the  things  themselves  are  concerned,  are  equally  hon- 
est and  honorable.  In  both  cases,  the  man  benefits 
himself  while  he  benefits  others  ;  and  this  is  all  that  can 
be  said  in  favor  of  any  other  exchange.  It  is  not,  of 
course,  denied,  that  the  lender  may  be  oppressive,  ty- 
rannical, and  avaricious  ;  nor  that  the  borrower  may  be 
fraudulent,  indolent,  and  profligate.  But  this  affects  not 
the  nature  of  the  transaction  per  se.  We  here  speak  of 
the  thing  itself,  and  not  of  the  manner  in  which  either 
party  may  act,  in  consequence  of  or  in  connexion  with  it. 

I  have  stated  but  one  form  in  which  the  laborer  is 
benefited  by  the  use  of  capital.  Another  foim  of  sim- 
ilar advantage  is  equally  common. 

Suppose  that  a  village  were  destitute  of  Capital,  dud 
that  its  inhabitants  were  therefore  obliged  to  be  employ- 
ei  in  simple  labor,  or  in  that  which  required  the  leist 
27* 


313       BENEFIT    OF    CAPITAL    TO     THE    LABORER. 

skill,  and,  therelore,  produced  the  lowest  v  Tges.  They 
would,  consequently,  be  poor,  and  would  be  able  to  ac- 
cumulate very  little  ;  since,  their  whole  earnings  would 
be  scarcely  more  than  sufficient  to  provide  them  with 
the  necessaries  of  life.  Let,  now,  an  opulent  man 
coine  among  them,  and  establish  a  manufactory  which 
sliould  employ  every  inhabitant  capable  of  labor.  Every 
one  knows,  that,  by  this  means,  the  wages  of  labor  would 
he  doubled,  and  all  the  comforts  of  living  would  be  in- 
comparably increased.  The  reason  is  the  same,  in  prin- 
ciple, as  in  the  other  case.  The  capitalist  furnishes  the 
jBateiials  and  the  tools,  by  which  the  laborer  is  now  en- 
abled to  use  his  skill,  in  addition  to  the  simple  labor, 
which  he  used  formerly  ;  that  is,  by  which  he  is  enabled 
to  labor,  not  with  his  hands,  but  also  with  the  agents 
of  nature.  The  result  is,  a  great  increase  of  the  pro 
ductiveness  of  industry  ;  and,  of  course,  a  much  largei 
amount  than  before,  becomes  the  portion  of  the  laborer 
In  the  division  of  the  profits  the  owner  receives  pay- 
ment for  the  use,  wear  and  tear,  and  risk  of  his  inst,ru- 
ments,  for  the  use  and  risk  of  his  material,  and  for  .bis 
own  labor  and  skill  in  supervision,  if  he  superintend  ;pr 
for  the  labor  and  skill  of  another,  if  he  ^oes^  it  by  a 
deputy.  The  workman  receives  payment  for  his  laljor 
andTbr  his  skill,  according  to  the  principles  illustrated  iu  ' 
the  preceding  chapter.  We  see,  that,  in  this  case^jije 
laborer  is  as  truly  benefite^Tiy  tTie  use  of  capital,  as  intbtj 
former.  The  only  difference  is,  that  here  he  leceives 
payment  only  for  labor  and  skill ;  and  there  he  received 
payment  for  the  use  of  capital,  deducting  the  rate  of  in- 
terest and  the  risk  of  loss.  It  will  be  easy  to  apply  the 
principle  here  illustrated  to  other  cases.  When  a  mer- 
chant borrows  capital,  he  is  thus  enabled  to  use  his  skill 
in  exchange.  Hence,  the  use  of  capital,  makes  the  dif- 
ference between  his  wages  as  a  merchant,  and  ivhat  his 
wages  would  be,  were  he  a  common  laborer.  And  so 
of  any  other  case. 

Hence,  we  see  how  incorrect  is  the  notion  frequently 
advanced,  that  when  property  is  destroyed  by  fire  or 
flood,  or  in  any  other  manner,  it  is  of  no  consequence 


OF     RISK    OF     INVESTMENT.  319 

to  the  coiiimiiiiity  ;  since  it  was  nothing  but  tl;e  posses- 
sions of  ilie  rich.  The  ricii  may,  or  may  not,  sillier  in 
tlieir  comforts  and  conveniences,  by  such  a  loss  ;  but  the 
poor  always  must  snller.  The  very  means  by  which 
their  wages  are  raised  from  those  of  simple  to  those  of 
skilful  labor,  from  the  wages  of  labor  with  their  hands 
alone  to  the  wages  of  labor  with  the  agents  of  nature,  is 
thus  taken  away.  Remove  capisal,  and  they  have  noth- 
ing to  offer  in  exchange,  but  mere  physical  force. 
Hence,  it  is  always  to  be  remembered,  that,  in  the  de- 
struction of  property,  the  poor  are  always  the  greatest 
sufferers. 

It  is  evident,  then,  that  capital  loaned,  should  be  paid 
for.  Interest  is  no  extortion,  and  no  unreasonable  de- 
mand. Jt  is  for  the  advantage  of  the  skilful  laborei  to 
borrow  it,  at  a  reasonable  interest,  as  much  as  it  is  for 
tile  advantage  of  the  capitalist  to  loan  it  ;  and  it  is  as 
much  for  the  advantage  of  tlie  laborer  as  the  capitalist, 
to  enter  into  that  partnership,  by  which  they  share  the 
profits  of  the  operation  between  them.  It  is  by  reason 
of  this  partnership,  as  I  have  said,  that  the  laborer  re- 
ceives the  wages  of  skilly  instead  of  the  wages  of  mere 
physical  force  ;  and  the  capitalist  is  able  to  employ  all 
his  capital  in  production,  instead  of  employing  only  that 
portion  of  it,  which  he  could  emj)loy  with  simply  his 
own  personal  industry  and  skill. 

We  next  proceed  to  consider  the  circumstances  which 
vary  the  rate  of  interest  at  which  capital  may  be  borrow- 
ed. These,  I  suppose  to  be  three,  viz:  1st.  Risk, 
iJd.  Convenience  of  Investment ;  and,  3d.  Productive- 
ness of  Capital. 


SECTION  II. 

OF    RISK    AND    CONVENIENCE    OF    INVESTMENT. 

I.    Of  Risk.       When  a  man    loans    his   property  to 
another,  there  is  always  a  risk  of  his  never  being  repaid 


320  OF     RISK    OF     INVESTMENT. 

Now,  the  greater  this  risk,  the  greater  will  be  ihe  inter 
est  which  a  capitaHst  may  justly  demand.  He  who 
would  loan  to  one  man,  at  six  per  cent.,  when  he  was 
sure  of  being  repaid,  would  not,  suiely,  loan  to  another 
man,  at  the  same  rate,  when  there  were  fjfty  chances  in 
a  hundred,  iliat  he  would  lose  both  principal  and  inter- 
est. At  any  rate,  he  who  did  so,  would  very  soon 
cease  loaning  altogether. 

This  risk  depends  upon  several  circumstances.  Of 
lhes(3,  the  principal  are  :  the  nature  of  the  employment  , 
the  character  of  the  borrov.er ;  and  the  character  of  the 
government. 

1.  There  is  a  difference  in  risk,  arising  from  the  dif- 
ferent modes  of  employing  capital.  For  instance,  prop- 
erty at  sea,  is  more  liable  to  destruction  than  property 
on  land.  Hence,  the  ancient  Athenians  made  a  difiier- 
ence  between  land  and  marine  interest.  The  formei 
was  at  twelve,  and  the  latter  as  high  as  sixty  per  cent, 
per  annum.  Property  in  merchandise  is  more  liable  to 
be  destroyed,  than  property  in  houses ;  property  in 
houses,  than  property  in  farms.  A  house  in  the  country, 
is  safer  than  a  house  in  town  ;  and  a  stone  house  is  safer 
than  a  wooden  house.  Property  emjjloyed  in  the  man- 
ufacture of  cotton,  is  less  liable  to  be  destroyed  than 
property  employed  in  the  manufacture  of  gunpowder 
Now,  when  a  capitalist  loans  property  to  be  invested  m 
some  one  of  the  above  forms  of  capital,  and  his  only  se- 
curity for  payment  consists  in  his  hold  upon  the  f)roperty 
in  wliich  it  is  invested,  it  is  evident  that  his  risk,  other 
things  being  equal,  will  depend  upon  the  safety  of  that 
property.  Hence,  it  is  reasonable  that  his  remuneration 
for  risk,  should  correspond  with  the  greatness  of  that  risk. 

2.  The  second  circumstance  which  enters  into  risk, 
is  the  personal  character  of  the  borrower.  This  is 
made  up  of  industry,  skill,  knowledge  of  business,  pe- 
cuniary ability,  and  moral  character.  When  these  have 
not  been  tested,  or  where,  having  been  tested,  they  have 
been  found  insufficien'  to  the  safe  conduct  of  business, 
there  will  be  a  correspondent  indispo'sition  in  his  neigh- 
bors to  loan  ;  because,  every  one  feels  that  there  is,  in 


OF     RISK     OF    INVESTMENT.  S2l 

such  a  case,  more  than  a  usual  risk.  Hence,  such  an 
individual  caunot  borrow,  unless  at  an  advanced  pre- 
iniuiii,  Grata  higher  rate  of  interest.  On  the  contrary, 
if  a  man  have  conducted  an  extensive  business,  for  a 
long  period,  with  undeviating  success,  he  attains  to  a 
high  mercantile  credit,  and  is  enabled  to  borrow  money 
at  the  lowest  rates.  But,  if  a  merchant  be  knov\n  to 
be  fiequently  embarrassed  ;  if  he  have  ever,  or  specially 
have  more  than  once,  failed  ;  mercantile  confidence  in 
liim  is  destroyed.  Pso  one  will  lend  him,  except  on  the 
most  unfavorable  terms  ;  hence,  he  can  do  business  wiih 
nothing  but  his  own  capital,  and,  of  this,  he  is  generally 
dtstitute.  Hence,  a  failure,  and  specially  a  second  fail- 
ure, is  commonly  fatal  to  mercantile  success.  Firm 
credit  is  rarely  afterwards  established. 

I  am  aware  that  these  two  causes  of  variation  of  lisk, 
are   apparently   modified,  by   the  practice   of  endorsing 
private  notes.      If  1  want  money  for  the  most  hazardous 
investment,  or  am  of  the  most  doubtful  credit,  if  1  can 
ofler  my  note,  endorsed   by  persons  of  established   mer- 
cantile character,  it  is  raised,  at   once,  to  par  ;   that  is, 
the  extra  risk  is  immediately  removed.      But  this  modifi- 
cation  is  only  apparent.      The   endorser   v\ill  rarely  do 
this  for  nothing.      He  either  himself  receives  a  premium 
for  it,  directly  ;   that  is,  he  is  paid    for  taking  the  risk  of 
default  of  j)ayment ;   or   else,  two  persons  mutually  en 
dorse  for  each  other,  and  thus,  the  risk  w  hich  A  assumes 
for  B,  is  paid  for,  by  B's  assuming  a  similar  risk  foi'  A 
It  is  singular,  thai  anyone  should  ever  ask  another  to  en 
dorse  his  note  merely  as  a  matter  of  comity.      It  should 
always  be  a  matter  of  business,  and  liable  to  be  paid  for, 
like  any  other  business  transaction.      A  merchant  should 
no  more  ask   another  to  endorse  his  note   gratuitously 
than  he  should  ask  him  to  insure  his  house  gratuitously. 
The  nature   of  the  transaction    is  precisely    the    same 
The  risk  in  the  one  case,  is  frcquenily  as  great  as  in  the 
other  ;  and  it  should  always,  as  n)uch  in  the  one  case  as  in 
the  other,  be  a  matter  of  compensfition.      Such,  at  least, 
seems  to  me  to  be  the  nature  of  the  case. 

3.    The  risk   incurred  in  lending  ca])ital,  is  afl'ected 


322  CF    RISK    OF    INVESTMENT. 

by  the  character  of  the  government.      This  affects  both 
private  and  pubhc  contracts. 

If  justice  be  well  administered,  and  every  man  have 
all  reasonable  security  that  he  will  have  the  whole  power 
of  the  society  at  his  disposal,  in  order  to  enforce  a  just 
contract  ;  of  course,  the  risk  is  less,  and  the  rate  of  in- 
terest lower,  than  when  experience  has  shown,  that  no 
such  security  exists.  Hence,  we  see  the  economy  of 
cood  legislation,  and  of  a  wise,  just,  and  incorruptible 
Judiciary.  Tiie  additional  interest  on  capital,  incurred 
in  consequence  of  the  bad  administration  of  justice  In  a 
country,  would  annually  pay  the  expenses  of  all  the 
courts  of  law,  ten  times  over. 

The  same  results  flow  from  confidence,  or  the  want 
of  confidence,  in  the  stability  of  a  government.  A  rev- 
olution not  unfrequently  dissolves  contracts,  dissipates 
security,  and  renders  obligations  valueless,  both  by  de- 
stroying the  evidence  of  tlieir  existence,  and  annihilating 
the  means  of  enforcing  them.  Hence,  when  such  an 
event  is  feared,  men  will  not  loan,  except  at  an  exorbi- 
tant premium  ;  and  they  generally  prefer  removing  their 
property  to  some  other  country,  to  subjecting  it,  for  any 
premimn  whatever,  to  the  risks  of  a  revolution. 

Tlie  same  may  be  said  of  public  conti'acls.  Govern- 
ments, in  whose  stability  undoubted  confidence  is  repos- 
ed, borrow  the  most  enormous  sums,  at  the  lowest  rates 
of  interest.  Those,  which  are  in  daily  danger  of  being 
overthrown,  can  scarcely  borrow  at  all,  or,  if  they  do 
borrow,  it  is  at  the  most  ruinous  premium.  'I'he  South 
American  governments  can  scarcely  bori'ow  at  any  in- 
terest. Great  liriiain,  notwithstanding  her  present  enor 
mans  debt,  borrows  at  three  or  four  per  cent.,  to  any 
amount  she  pleases.  Nay,  so  great  is  the  public  confi- 
dence in  her  permanency  and  integrity,  that,  probably, 
there  is  scarcely  a  civilized  nation  on  earth,  which  does 
not  at  present  own  some  share  of  her  national  debt. 
The  greater  the  civil  connnotions  of  other  countries,  the 
more  easily  can  she  borrow  ;  because,  capitalists  natu- 
rally invest  their  property  where  they  are  confident  of  its 
security  ;  ^nd  confi(lent  that  its  interest  will,  under  all 
circumstances,  be  rcgnl.nly  p;iid. 


CONVENIENCE    OF    INVESTMENl.  323 

II.  The  rate  of  interest  is  varied  by  the  convenience 
of  ihe  iiivestmeiit.  'I'he  coiivc^iiieiKe  of  an  iiivesiiuent, 
depeiuis  upon  several  circunisiances. 

1.  Facility  oj  transfer.  \\  hen  a  man  loans  capital 
he  is,  of  course,  ignorant  of  the  future,  and  does  not 
know  how  much  he  may  need  it,  at  some  subsequent 
time.  If  he  loan  at  six  per  cent.,  for  two  years,  he  may, 
in  six  months,  find  some  investment  in  whicii  it  would 
yield  him  eight  per  cent.  ;  but,  having  loaned  it  for  two 
years,  he  cannot  now  withdraw  it.  Hence,  it  is  a  great 
advantage,  if  it  can  be  so  invested,  that  he  may,  without 
loss,  recall  it  at  any  moment. 

2.  Permanency  of  investment.  ]f  a  man  does  not 
wish  to  withdraw  a  loan,  it  is  an  advantage  to  him  to 
have  it  continue  for  a  long  period  ;  because,  he  is  thus 
saved  the  loss  of  interest  wiiich  would  occur  during  the 
time  of  transfer,  and  the  trouble  and  inconvenience  of 
finding  another  borrower.  This  is  of  special  benefit  to 
willows,  orphans,  persons  retired  from  business,  and  all 
those  persons  who  wish  not  to  labor  with  their  own  cap- 
ital themselves,  but  only  to  live  upon  the  interest  of  it. 

3.  Punctuality  in  the  payment  of  interest.  It  is  a 
great  convenience  to  those  who  invest  capital,  to  be  able 
to  calculate  with  certainty  on  the  payment  of  interest. 
They  can  thus,  with  ease,  adjust  their  expenses,  both  to 
the  amount  of  their  income,  and  to  the  tin)e  of  their  re- 
ceipt of  it.  If  they  wish  to  re-invest  the  interest,  they 
can  make  their  arrangements  with  certainty  ;  and  thus  in- 
vest it  with  the  greatest  advantage.  They  are  also  saved 
the  trouble  of  looking  after  their  debtor,  and  they  avoid 
the  inconvenience  of  that  personal  altercation,  which  is 
liable  to  arise  respecting  pecuniary  transactions. 

When  any  form  of  investment  combines  these  advan 
tages,  men  are  found  to  prefer  it  to  one  which  is  desti- 
tute of  them  ;  and  hence,  they  will  loan  their  money  on 
these  terms,  at  a  lower  rate  of  interest  than  on  any  oth- 
er. When  a  debt  is  in  this  form,  it  is  said  to  be  fund- 
ed ;  and  the  creditors  are  said  to  hold  stock.  Hence. 
Dublic  debts  are  generally  thus  arranged.  The  various 
companies,  formed  for  banking   purposes,  and   purposes 


324  INTEREST    DEPENDING    ON    PROFIT. 

of  internal  improvement,  are  constructed  on  the  same 
principles.  Everyone  who  contributes  a  certain  amount 
towards  the  capital  of  such  a  coujpany,  receives  a  certifi- 
cate that  he  owns  such  a  share  of  that  capital.  He  is 
entitled  to  his  portion  of  the  profits  at  stated  times.  He 
may  retain  this  certificate  himself,  as  long  as  he  pleases  ; 
or  he  may  sell  it,  at  any  moment,  to  any  purchaser  who 
may  want  it.  Hence,  money  may  always  be  borrowed, 
under  these  circumstances,  at  the  lowest  rates. 


4r' 


SECTION  IIT. 

OF  THE  RATE  OF  INTEREST,  AS  AFFECTED  BY  THE 
USE  OF  CAPITAL. 

When,  however,  the  risk  is  the  same,  we  find  interest 
higher  in  some  countries  than  in  others  ;  and  higher  in 
the  same  country  at  one  time  than  at  another.  Thus, 
when  the  security  is  equally  good,  interest  is  higher  in 
this  country  than  in  Great  Britain  ;  and,  in  this  country, 
it  is  higher  in  the  new,  than  in  the  older  states.  And^ 
we  also  find,  that  it  is  lower  now,  in  Great  Britain,  than 
formerly  ;  and  that  it  generally  becomes  less,  as  a  com- 
munity grows  older. 

This  shows  that  there  must  be  causes  of  variation  in 
interest,  aside  from  that  of  risk.  A  few  of  these  re- 
main to  be  considered. 

I.  The  average  Profit  of  Capital.  The  profit  of 
capital  is  that  annual  value  which  it  yields  to  the  possess 
or,  after  he  has  (^educted  the  principal,  and  paid  the  ex- 
penses incident  to  his  actual  operation.'  Thus,  if,  by 
the  use  of  one  thousand  dollars  for  a  year,  I  am,  after 
replacing  the  principal  and  all  the  cost  of  my  operation, 
one  hundred  dollars  richer,  this  one  hundred  dollars  is 
the  profit  of  my  capital.  Now,  the  greater  this  is  at 
any  time,  the  greater  will  be  the  sum  which  1  shall  be 
willing  to  pay  for  the  use  of  one  thousand  dollars.     If, 


SUPPLY    AND    DEMAND,  325 

by  the  use  of  capital,  I  can,  after  paying  all  expenses, 
realize  twenty  per  cent.,  I  can  afford  to  pay  more  for  the 
use  of  it,  than  if,  after  paying  all  expenses,  1  could  re- 
alize only  five  per  cent. 

To  specify  the  various  causes  on  which  the  difference 
of  profit  of  capital  depends,  perhaps  would  he  ini()ossi- 
hle.  Those  which  seem  to  me  of  the  most  general  im- 
portance, are  : 

1  Fertility  of  Land.  He  who  wished  to  borrow 
money  to  invest  in  agriculture,  could  aflbrd  to  pay  higher 
interest,  when  the  land  produced  fifty  bushels  to  the 
acre,  than  when  it  produced  only  twenty-five  bushels  to 
the  acre,  provided  he  could  procure  the  land  for  the 
same  purchase  money. 

2.  Productiveness  of  Industry.  The  use  of  natural 
agents  adds  greatly  to  the  value  annually  produced  from 
a  given  amount  of  capital.  Tliis  will  tend  to  raise  the 
price  of  capital  ;  since  a  man  will  give  more  for  money 
to  invest  in  a  machine  which  will  produce  one  thousand 
dollars  a  year,  than  in  one  which  will  produce  only  five 
hundred  dollars.  It  is  true  that  the  influx  of  capital  will 
tend  to  bring  any  one  branch  of  industry,  in  process  of 
lime,  to  the  general  level.  But  that  progressive  in- 
crease of  productiveness,  which  belongs  to  the  progress 
of  civilization,  tends  to  keep  up  the  price  of  capital, 
which  would,  otherwise,   fall  unreasonably  low. 

3.  The  Demand  for  Exchange.  The  greater  the  de- 
mand for  exchange,  the  more  profitable  must  be  that 
capital  which  is  invested  in  exchange.  In  a  town  where 
mercantile  business  is  brisk,  and  a  man  can  sell  all  his 
stock  at  a  good  profit,  two  or  three  times  in  the  course  of 
a  year,  money  will  bear  a  higher  interest  than  in  a  town 
■inhere  exchanges  are  slow,  and  he  must  keep  his  goods 
on  hand  for  a  year  or  two. 

II.  The  Ratio  between  Supply  and  Demand.  This 
produces  the  same  effect  upon  the  rate  of  interest,  as 
upon  every  thing  else.  Whatever  be  the  profit  of  cap- 
ital, if  the  supply  be  very  small,  the  price  will  rise  ir. 
proportion  :  since  he,  who  by  employing  it  at  a  high 
price,  can  make  a  small  profit,  will  rather  so  employ  U^ 
28 


326  SUPPLY    AND    DEMAND. 

than,  by  doing  witlioiit  it,  make  no  profit  at  all.  Thus, 
if,  by  the  use  of  one  thousand  dollars  for  a  year,  I  could 
realize  five  hundred  dollars,  I  might  be  willing  to  pay 
two  hundred  for  the  use  of  it,  rather  than  not  to  have  it; 
for,  in  the  latter  case,  1  should  gain  nothing.  If,  then, 
there  were  but  little  capital  in  the  market,  and  many 
persons  were  as  willing  to  give  this  rate  of  interest  a?, 
myself,  1  should  be  obliged  to  give  it.  But  if,  on  th*^  con- 
trary, there  were  many  persons  desirous  of  lending,  and 
there  was  much  capital  in  the  market,  and  I  were  the  on- 
ly person  who  would  be  willing  to  give  this  interest,  they 
would  underbid  each  other,  and  I  should  be  able  to 
procure  it  of  him  who  would  loan  it  to  me  at  the  lowest 
rate.  I  might  then  be  able  to  borrow  it  for  one  hundred 
and  fifty,  one  hundred,  or  sixty  dollars  per  annum. 

Hence,  the  rate  of  money  will  vary  in  any  country, 
according  to  the  effect  of  these  two  circumstances.  In 
a  new  and  prosperous  country,  interest  is  always  high. 
This  results  from  several  reasons. 

1.  Land  is  very  cheap,  and  at  first  is  all  of  very  near- 
ly the  same  market  price.  In  many  cases  it  can  be 
had  for  almost  nothing. 

2.  Land  is  very  fertile.  The  produce  of  a  soil  when 
new  is  generally  greater  than  ever  afterwards. 

3.  The  soil,  never  needing  manure,  requires  but 
small  investments  of  capital,  and  these  are  very  richly 
repaid. 

4.  The  inhabitants  of  a  new  country  can  carry  with 
them  but  few  of  the  conveniences  of  life.  These  must 
be  purchased  after  they  arrive  there,  and  must  either  be 
made  on  the  spot,  or  be  imported.  Neither  of  these 
can  be  done  without  capital.  And,  as  the  demand  for 
ihese  conveniences  is  imperative,  and  as  the  income  of 
land  is  abundant,  the  settlers  are  willing  to  pay  a  high 
price  for  them.  Hence,  the  profit,  both  of  mechanical 
and  of  commercial  labor,  is  very  great  ;  and  the  price 
which  is  paid  for  capital  is  very  liigh. 

5.  The  inhabitants  of  a  new  country  have  generally 
very  numerous  exchanges  with  the  aborigines.  Such 
exchanges  are  exceedingly  profitable.     But  these  can- 


SUPPLY     4ND    DEMAND.  S27 

not  be  carried  on  without  capital  ;  and,  of  course,  capi- 
tal, on  this  account,  always  hears  a  veiy  iiii^h  price. 

On  the  contrary,  the  supply  of  capital,  in  a  new  coun- 
try, is  generally  small. 

1.  Emigrants  are,  by  no  means,  the  most  wealthy 
classes  of  a  community.  Those  who  are  living  in  peace 
and  prosperity  at  home,  are  not  generally  those  who  are 
most  willing  to  brave  the  perils  and  hardships  of  the  wil- 
derness. 

2.  Those  who  are  not  inclined  to  expose  their  persona 
to  the  hardships  of  a  new  country,  are  not  inclined  to 
send  their  capital  where  they  are  not  present  to  watch 
over  it  themselves.  Hence,  it  is  difficult  for  a  while, 
for  a  new  people  to  borrow ;  and  they  can  overcome 
this  difficulty  only  by  the  payment  of  a  high  interest. 

These  are,  as  I  suj)j)ose,  the  causes  of  the  high  rate 
of  interest  in  new  countries,  on  the  borders  of  civilization, 
and,  generally,  wherever  savage  and  civilized  nations 
intermingle. 

As  a  country  becomes  settled,  however,  these  causes 
begin  to  operate  less  powerfully  ;  and  thus,  the  rate  of 
interest  gradually  diminishes. 

1.  The  annual  produce  of  the  earth  is,  year  after 
year,  changed  into  fixed  capital  :  and  thus,  the  demand 
for  capital  is  sup])lie(l  from  themselves. 

2.  The  fertility  of  the  soil  diminishes,  so  that  it  will 
afford  to  pay^less  interest. 

3.  Land  is  sold  at  different  prices,  according  to  its 
fertility;  and,  as  it  rises  in  price,  the  degree  of  profit  to 
the  purchaser  is  diminished. 

4.  The  wants  of  the  natives  are  supplied;  and,  hence, 
one  source  of  gain  is  dried  up. 

5.  A  more  perfect  knowledge  of  the  country,  and 
more  perfect  confidence  in  its  prosperity,  diminish  the 
unwillingness  of  persons  in  older  countries  to  loan ; 
and  hence,  capital  from  abroad,  may  be  procured  with 
greater  facility. 

Hence,  the  gradual  operation  of  these  causes,  must 
tend  to  reduce  the  rate  of  interest  in  different  countries 
to  tne  same  averaere. 


328  FREEDOM    OF    CAPITAL. 

Hence,  the  constant  tendency  of  civilization,  is  to  the 
reduction  of  the  rate  of  interest.  As  capital  becomes 
more  abundant,  in  proportion  to  the  uses  that  are  to  ba 
made  of  it,  it  commands  a  less  price ;  that  is,  a  man 
can  gain  less  than  formerly  with  a  capital  of  one  thou- 
sand dollars;  and  hence,  he  is  wilhng  to  pay  a  less  inter- 
est for  it.  But  it  is  also  to  be  remembered,  that  a  much 
larger  proportion  of  men  are  worth  one  thousand  dollars 
than  formerly,  and  that  for  one  that  was  worth  one 
thousand  dollars,  fifty  years  ago,  there  are  fifteen  or 
twenty  who  are  worth  ten  thousand  dollars  now ;  that  is, 
men,  with  the  same  labor,  are  able  to  secure  as  many 
or  more  comforts  than  formerly ;  but  they  are  obliged 
to  do  it  by  the  use  of  a  larger  amount  of  capital.  They 
are  obliged  to  labor  with  a  larger  capital,  but  that  large 
amount  is  as  easily  procured  as  a  less  amount  was  for- 
merly. Hence,  the  complaint  so  frequently  heard  of 
the  increasing  difficulty  of  accumulating  property,  is 
really  unfounded  ;  and,  taking  the  difficulty  or  ease  of 
procuring  capital  into  the  account,  the  more  advanced 
periods  of  society  are  as  favorable  as  any  to  the  industri- 
ous classes. 

III.  The  rate  of  interest  is  affected  by  the  freedom 
of  capital.  By  freedom  of  capital,  I  mean  the  unfetter 
ed  liberty  of  the  individual  to  employ  his  capital  in  any 
innocent  way  that  he  pleases.  When  this  liberty  is  en- 
joyed, every  one  chooses  that  way  in  which  he  supposes 
that  he  shall  be  most  successful  ;  that  is,  in  which  he 
will  reap  the  largest  profit.  The  larger  the  profit  he 
realizes,  the  larger  will  be  the  interest  which  he  will  be 
willing  to  pay.  When  he  is  obliged  to  withhold  it  from 
a  mode  of  investment  which  he  prefers,  and  to  employ 
it  in  one  which  he  does  not  prefer  ;  he  must,  therefore 
diveit  it  fi^om  a  more  to  a  less  profitable  mode  of  invest- 
ment. Hence,  as  he  is  obliged  to  emj)loy  it  in  a  less 
profitable  instead  of  a  more  profitable  investment,  he 
can  aflbrd  to  pay  less  interest ;  and  the  price  of  interest, 
by  the  effect  of  this  interference,  must  fall.  Such  must 
be  the  effect  of  all  monopolies,  and  of  al!  means  by 
which  the  active  power  of  capital  is  diminished 


i 


INTEREST  AFFECTED  BY  TAXATION.     329 

IV.  The  rate  of  interest  is  affected  by  taxation.  A 
tax,  abstracts  its  wliolc  amount  realized,  besides  the 
cost  of  collecting  it,  from  the  annual  profits  of  capital. 
U  a  mechanic  realize,  from  a  capital  of  one  thousand 
dollars,  a  nett  saving  of  one  hundred  and  fifly  dollars, 
and  is  obliged  to  pay  fifty  dollars  of  this  sum  in  taxes, 
he  is  in  the  condition  of  one  who,  without  being  obliged 
to  pay  taxes,  realized  a  saving  of  only  one  hundred  dol- 
lars. Hence,  he  would  be  able,  if  he  conducted  his 
business  upon  a  hired  capital,  to  pay  only  a  diminished 
rate  of  interest.  And,  if  it  be  said  that  he  may  raise 
the  price  of  his  labor,  and  thus  repay  himself,  it  may  be 
answered  :  1st.  By  raising  the  price  of  his  labor,  he 
diminishes  the  demand,  and  his  profits  are  thereby  re- 
duced, so  that  he  will  be  no  better  able  to  pay  the  inter- 
est in  question.  And,  2dly,  as  other  men  being  taxed, 
will  raise  their  prices,  he  is  obliged  to  pay  more  for 
every  thing  that  he  consumes  ;  and  thus,  again,  his  abil- 
ity is  lessened.  Every  one  must  see,  that  the  immense 
sum  which  (jreat  Britain  annually  pays,  as  the  interest  of 
her  national  debt,  is  so  much  abstracted  from  the  profits 
of  her  capital  ;  and  that  the  amount  of  profit  to  the  Indi- 
vi^ials  must  be  greater,  just  in  proportion  as  that  is 
diminished  ;  and  that  the  profits  of  the  capitalist  and  the 
producer  would  rise  accordingly. 

From  what  has  been  said  above,  we  come  to  the  fol- 
lowing general  conclusions  : 

1.  That,  other  things  being  equal,  interest  will  be 
high  when  the  risk  is  great ;  and  low,  when  the  risk  is 
small. 

2.  Thai  interest  will  be  high,  when  the  profit  of  capi- 
tal is  great ;  and  low,  when  the  profit  of  capital  is  small. 

3  That  both  of  these  afi^ect  each  other,  within  cer- 
tain limits  ;  that  is,  when  profit  is  great,  if  the  risk  be 
also  great,  interest  will  be  very  high ;  because  the  in- 
crease of  risk  diminishes  tlie  su})ply. 

4.   But,  when  ])rofit  is  low,  and   risk  is  great,  there 
will  be  no   loaning  whatever  ;  because,  what  is  paid  for 
risk,  will  be  more  than  can  be  gained  by  use,  and,  hence, 
men  could  not  profit  by  borrowing. 
28* 


330  OF    LEGAL    RATE    OF    INTEREST. 

5.  And,  hence,  we  see  tliat  the  rate  of  interest  will 
be  ahvays  affected  by  every  circumstance,  which  affects 
either  risk  or  profit  of  capital.  War,  or  the  rumor  of 
war,  by  increasing  the  risk,  raises  the  rate  of  interest  in 
property  affected  by  it.  In  property  not  affected  by  it, 
the  same  cause  depresses  the  rate  of  interest ;  because 
it  diminishes  the  means  and  opportunity  for  produc- 
tion, and,  of  course,  diminishes  the  profit  of  capital. 
On  die  other  hand,  the  discovery  of  any  new  mode  of 
profitably  employing  capital,  raises  the  rate  of  interest, 
by  creating  an  increased  demand  for  capital. 

6.  And  hence,  again,  we  see  that  the  rate  of  interest, 
at  any  particular  time  or  place,  is  not  of  itself  any  indi 
cation  of  the  prosperity,  or  of  the  decline  of  a  country. 
The  indication  is  to  be  sought  for,  not  in  the  rate  of  in- 
terest, but  in  the  cause  by  which  that  rate  is  affected. 

1.  Whenever  the  rate  of  interest  is  raised  by  in- 
crease of  risk,  this  is  an  indication  of  adversity.  Rise 
of  interest,  from  such  a  source,  benefits  no  one.  It  is 
of  no  service  to  the  lender,  because  he  derives  no  profit 
from  that  part  of  the  premium  which  insures  him  against 
loss.  It  is  as  profitable  for  him  to  loan  for  five  per 
cent,  without  risk,  as  to  loan  for  ten  per  cent.,  v^en 
five  per  cent,  is  for  risk,  and  five  per  cent,  for  use.  It 
is  an  injury  to  the  borrower,  because,  one  hundred  dol- 
lars are  worth  no  more  to  him  when  he  pays  five  per 
cent,  for  risk,  than  when  he  pays  nothing  for  it.  What- 
ever, therefore,  is  paid  for  risk,  is  always  a  loss  to  both 
parties  ;  and  the  more  that  is  thus  paid,  the  worse  it  is 
for  both.  Hence,  the  rise  of  interest  caused  by  bad 
government,  civil  comniotion,  revolutions,  wars,  and  gen- 
eral immorality,  is  always  an  indication  of  national  de- 
cline ;  and  the  fall  of  interest,  produced  by  the  contrary 
causes,  is  an  indication  of  national  prosperity. 

2.  On  the  other  hand,  the  temporary  rise  of  mterest 
caused  by  increased  productiveness,  and  the  devel- 
opment of  new  national  resources,  is  an  indication  of 
national  prosperity.  It  shows  that  more  than  ordinary 
valuable  modes  of  employing  capital  have  been  discov- 
ered, and,  that  men  can  afford  *o  pay  a  larger  price  foi 


OF    LEGAL    RATE    OF    INTEREST.  331 

ihe  use  of  capital.  I  have,  however,  called  this  a  tem- 
porary rise  ;  because,  a  rise  from  such  a  cause,  will  soon 
equalize  itself.  Increased  productiveness  will  soon  sup- 
ply capital,  or  it  will  be  imported  from  less  favored 
countries.  Thus,  in  new  countries,  the  rate  of  interest 
is  high  ;  but  this  is  by  no  means  an  indication  of  adver- 
sity, for  such  countries,  while  paying  so  high  a  rate  for 
capital,  yet  grow  rich  faster  than  those  from  which  they 
borrow. 

3.  Again  :  The  gradual  fall  of  the  rate  of  interest 
caused  by  the  diminution  of  risk,  and  the  greater  abun- 
dance of  capital,  is  an  evidence  of  prosperity.  Ii 
sliovvs  that  a  larger  proportion  of  the  means  of  subsis- 
tence is  falhng  to  the  share  of  every  individual  ;  that 
every  man  can  more  easily  procure  capital  ;  and  that 
every  man,  in  order  to  support  himself,  produces  a 
larger  amount  than  formerly,  of  whatever  will  contribute 
to  the  comfort  and  convenience  of  his  neighbor. 

4.  On  the  other  hand,  the  fall  of  the  rate  of  interest, 
caused  by  u  suspension  of  the  means  of  production,  is 
an  evidence  of  national  adversity.  Suppose  a  war  to 
occur  betwsen  this  country  and  France.  The  capital 
now  employed  in  transportation,  must  be  almost  wholly 
unproductive.  Tiie  capital  employed  in  producing  our 
exports  to  that  country,  must  also  be  useless.  Hence, 
the  rate  of  interest  would  fall  ;  for,  many  men  would 
have  ao  business  in  which  to  employ  their  capital.  The 
case  would  be  the  same,  were  a  fall  in  the  price  of 
capiicl  to  proceed  from  civil  commotion,  or  any  similar 
cause.  And,  the  adversity  would  remain,  until  the 
cause  were  removed.  For,  if  capital  were  removed  out 
of  the  country,  until,  from  reduction  in  the  supply,  the 
rate  of  interest  rose,  the  industry  of  the  country  would 
still  be  depressed,  until,  by  peace,  order,  and  good  gov- 
ernment, it  regained  its  natural  advantages. 

Hence,  we  see  that,  in  order  to  form  any  correct 
opinion  respecting  the  condition  of  the  country,  from  (he 
present  rate  of  interest,  we  must  always  seek  for  the 
causes  of  that  rate,  instead  ol'  deciding  from  the  mere 
rate  itself. 


332  OF    LEGAL    RATE    OF    INTEREST 

It  is  almost  unnecessary,  after  what  has  been  already 
advanced,  to  stale  that,  in  the  view  of  the  Political 
Economist,  laws  regidaiing  the  rate  of  interest  are  in- 
iurious  to  the  prosperity  of  a  country.  Some  of  the 
reasons  for  this  opinion,  are  the  following  : 

1.  Such  laws  violate  the  right  of  property.  A  man 
has  the  same  right  to  the  market  price  of  his  capital,  in 
money,  as  he  has  to  the  market  price  of  his  house,  his 
horse,  his  ship,  or  any  other  of  his  possessions. 

2.  The  real  price  of  capital  cannot  be  fixed  by  law,  any 
more  than  the  real  price  of  flour,  or  iron,  or  any  other 
commodity.  There  is,  therefore,  no  more  reason  for 
assigning  to  it  a  fixed  value,  than  there  is  of  assigning  a 
fixed  value  to  any  other  commodity. 

3.  The  price  of  capital,  or  money,  is  really  more  va- 
riable than  that  of  any  other  commodity.  Most  other 
commodities  have  but  one  source  of  variatign,  namely, 
use  or  profit.  But  capital,  in  the  form  of  money,  is  li- 
able to  two  sources  of  variation,  risk^  and  use.  These 
va'^y,  at  different  times,  in  different  investments,  and  with 
difi'erent  individuals.  There  is,  therefore,  less  reason  why 
the  price  of  money  should  be  fixed  by  law,  than  why 
the  price  of  any  thing  else  should  be  so  fixed. 

4.  These  laws,  instead  of  preventing,  give  rise  to 
great  and  disastrous  fluctuations  in  the  price  of  money. 

Suppose  that,  to-day,  money  is  worth,  in  the  ordinary 
operations  of  business,  ten  per  cent.,  and  it  is  worth  six 
per  cent,  in  loan.  A  iTian  will  as  soon  loan  as  employ 
it  in  business,  if  he  possess  more  than  he  wishes  to  use. 
There  will  then  be  a  fair  supply  of  money  in  the  market. 
Bu<,  let  the  profits  of  capital  rise,  so  that,  in  the  ordi* 
nary  operations  of  business,  capital  is  worth  twenty  per 
cent.  If,  now,  the  rate  of  interest  rose  with  this  in- 
creased rate  of  profit,  the  same  individuals  would  be  as 
willing  to  loan,  as  before  ;  and  thus,  the  supply  follow- 
ing tbe  demand,  there  would  arise  no  peculiar  scarcity. 
The  high  rate  of  interest  would  also  attract  capital  from 
abroad  ;  and  thus,  in  a  very  short  time,  it  would,  in  this 
l)articular  place,  be  brought  to  the  geneial  level. 

But  suppose  that  six  per  cent,  were  the  highest  legal 


OF    LEGAL    RATE    OF    INTEREST.  833 

rate  of  interest,  and  that  he  who  loaned  at  a  higher  rate, 
was  liable  to  lose  both  his  principal  and  -interest,  and 
also  his  mercantile  character.  In  this  case,  as  soon  as 
the  profit  of  capital  in  business  rose  to  fifteen  or  twenty 
per  cent.,  no  one,  who  could  thus  employ  it,  would  loan 
it  at  six  per  cent.  Hence,  as  soon  as  it  thus  rose,  the 
supply  would  be  immediately  diminished  ;  and  this 
would,  of  course,  cause  a  greater  rise  of  interest.  Those 
who,  from  honor  or  conscience,  obeyed  the  laws,  would 
withdraw  from  the  market,  and  employ  their  capital  in 
some  other  way  ;  and  no  one  would  loan,  but  those  who 
were  willing  to  risk  the  conseqaences  of  detection. 
These,  having  the  money  market  in  their  own  hands, 
will,  of  course,  charge  for  the  use,  and  for  the  risk  of 
detection  ;  and,  hence,  the  price,  in  a  few  days,  may 
become  doubled  or  trebled.  And,  at  the  same  time, 
although  the  real  value  of  money  may  be  fifteen  or 
twenty  per  cent.  ;  yet,  because  the  legal  price  is  six 
per  cent.,  there  is  no  inducement  for  capital  to  come  in 
from  abroad,  to  supply  the  demand.  Hence,  the  change 
in  the  money  market  has,  by  reason  of  this  law,  no  ten- 
dency whatever  to  regulate  itself. 

It  is,  I  presume,  needless  to  add,  that  such  laws  can 
never  be  enforced.  Men  in  want  of  money,  will  pay 
what  they  please  for  it,  and  those  who  choose  to  pay 
enough  for  it,  can  generally  borrow.  The  efiect,  then, 
of  the  usury  laws,  is  merely  to  drive  the  best  and  most 
conscientious  lenders  out  of  the  market,  or  else  oblige 
thein  to  lend  by  means  of  subordinate  and  less  scrupu- 
lous agents.  For  this  agency  the'  borrower  must  pay, 
and  hence  the  additional  rate  of  interest.  To  this  it  is 
objected,  that  money  is  not  like  other  thirrgs,  inas.iuich 
as  it  is  a  necessary  of  life  to  the  merchant,  and  therefore 
society  must  step  in  to  deliver  him  from  the  effects  of 
extortion.      To  th's  it  may  be  answered  as  follows  : 

1.  It  is  manifest  that  this  interference  does  not  render 
the  merchant's  condition  the  better,  but  rather  the  worse. 
Though  the  assistance,  therefore,  be  well  intended,  he 
may  very  well  dispense  with  it. 

2.  The  greater  the  necessity  of  money,  the  more 


334  NATURE    AND    PRICE    OF    STOCKS 

urgent  s  the  necessity  of  leaving  it  undisturbed  by  legis 
'ative  nterference.  It  makes  small  dilierence  to  the 
commun'ty,  whether  the  price  of  jewelry  be  fixed  by 
law  or  not.  But,  suppose  that  when  flour  would  bring 
ten  dollars  a  barrel,  the  government  forbade  it  to  be  sold 
for  more  than  seven  dollars.  Who  does  not  see  that 
the  flour  would  be  all  driven  away  and  the  people 
starved  ?  The  sauie  principle,  for  aught  I  see,  applies 
to  the  rate  of  interest. 

Hence,  I  believe  all  enactments  establishing  a  legal 
rate  of  interest,  are  injurious  and  unwise.  The  only 
enactment  of  any  vakie  would  be  one  which  should  de- 
fine the  usual  rate,  when  nothing  was  said  on  the  sub- 
ject in  the  contract.  The  use  of  this  would  be  to  pre- 
vent disputes.  This  is  always  an  advantage  to  both 
parties. 

I  shall  conclude  this  chapter,  with  a  few  remarks  on 
the  nature  and  price  of  stocks. 

I  have  already  remarked,  that,  when  a  company  is 
formed  for  any  purpose  requiring  capital,  and  yielding 
interest,  the  capital  is  divided  into  portions  called  shares, 
and,  that  any  one  has  a  right  to  subscribe  for  as  many 
of  these  as  he  pleases.  If  the  shares,  for  instance,  are 
one  hundred  dollars  each,  he  who  takes  one  share,  pays 
one  hundred  dollars,  and  so  of  any  other  number.'  For 
every  share  he  receives  a  certificate  of  ownership,  and, 
so  long  as  he  owns  this  certificate,  he  is  a  member  of 
the  company  ;  he  is  entitled  to  the  same  rights  as  the 
rest ;  and  receives  his  portion  of  the  profit.  These 
certificates  are  called  stocks.  They  are  transferable, 
like  any  other  property,  and  the  owner,  as  in  any  other 
case,  sells  th#m,  if  he  wishes  to  do  so,  for  whatever  they 
will  bring.  The;  owner,  for  the  time  being,  is  the  stock- 
holder ;  is  amenable,  in  his  proportion,  to  all  the  rules  of 
the  company  ;  and  la  entitled  to  his  proportion  of  all  the 
benefits  accruing  from  the  use  of  the  capital.  Such  is 
the  nature  of  bank,  insurance,  railroad,  canal,  and  other 
stocks 

The  same  principle   is   frequently   applied    to  loans 
Suppose  a  government  wishes  to  borrow  five  millions  of 


( 


NATURE    AND    PRICE    OF     STOCKS,  335 

dollars,  at  five  per  cent.,  for  twenty  years,  the  interest 
to  be  |)nid  (luarierly.  •  'i'hu  coiuliiions  of  (he  loan  are 
specified,  and  subscription  books  0|)ened,  in  difiereiit 
places  throughout  tiie  nation.  The  vviioje  sun)  is  divided 
into  siiares,  of  which  every  one  may  subscribe  for  as 
many  as  he  will.  Every  subscriber,  thus,  in  fact,  loans 
to  the  government,  on  the  terms  proposed,  as  much  as 
he  subscribes  for.  When  his  subscription  is  paid,  he 
receives  his  certificate,  which  contains  an  obligation  of 
the  government  to  pay  the  money  at  the  ap|)()inted  lime, 
and  which  entitles  him  to  receive  the  interest  for  the 
sum  which  he  has  loaned,  at  the  rate  and  times  specified. 
These  certificates  are  also  called  stocks^  and  are  trans- 
ferable, like  any  other  |)roperty.  Hence,  they  are  an 
article  of  mercharidise,  like  any  thing  else  ;  and,  as  per- 
sons are  wishing  both  to  buy  and  sell,  every  dav,  the) 
are  every  day  bought  and  sold,  in  great  numbers,  in  all 
commercial  capitals. 

Now,  suppose  money  to  be  loaned  in  this  way  ;  it  is 
90.  much  ca|)ital  at  interest,  and  it  is  affected  by  the 
same  circumstances  as  other  capital  at  loan.  As  the 
convenience  of  investment  is,  however,  generally  the 
same,  the  rate  at  which  such  slocks  sell.^  will  be  affected 
wholly  by  profit  and  risk. 

1.  Supposing  the  risk  to  be  the  same;  these  stocks 
are  affected  by  the  profit  annually  paid  on  the  invest- 
ment. Thus,  suppose  the  risk  to  be  nothing,  and  the 
common  rate  of  interest  in  a  community  to  be  six  f)er 
cent.  •  If  I  own  a  share  equal  to  one  hundred  dollars, 
and  it  pay  six  per  cent,  interest,  this  share  will  idways 
sell  for  one  hundred  dollars.  Suppose  that  the  ordinary 
rate  of  interest  being  the  same,  this  share  pays  twelve 
per  cent,  interest.  I  can  then  sell  it  for  two  hundred 
dollars  ;  because,  he  who  pays  two  hundred  dollars  for 
it,  will  receive  interest  at  the  rate  of  six  per  cent., 
which  is  as  much  as  he  would  receive  from  any  other 
investment.  On  the  contrary,  if  (his  share  paid  but  three 
per  cent,  interest,  [  could  get  but  fifty  dollars  for  it  ; 
since  three  dollars  is  the  interest  of  no  more  than  fifty 
dollars.      Thus,  other  things   being  equal,  the  price  of 


336  NATURE    AND    PRICE    OF    STOCKS 

Stocks  will  always  depend  upon  the  interest  which  they 
pay  ;  and  they  will  always  sell  for  that  sum,  of  which 
the  dividend  which  they  pay  is  the  regular  interest. 

This,  however,  is  sometimes  afl'ected  by  the  anticipa- 
tions of  men.  A  stock  which  pays  very  little  riou',  may 
be  expected  to  pay  largely  at  some  future  time.  Its 
price  may,  therefore,  be  kept  up  by  this  circumstance. 
On  the  other  hand,  a  stock  may  pay  largely  now,  but 
there  may  be  a  fear  that  it  will  soon  become  icorthless  ; 
this  will,  of  course,  depreciate  it  in  value. 

So,  also,  of  ris"k.  The  profit  of  stocks  being  the 
same,  their  price  is  inversely  as  the  risk.  If  a  stock 
pay  the  usual  interest,  but  is  in  danger  of  sinking  the 
principal,  it  will  be  depreciated  acordingly.  If  a  gov- 
ernment pay  good  interest  for  a  loan,  but  there  be  dan- 
ger that  it  will  be  overturned  by  a  revolution,  the  stock 
will,  of  course,  fall.  1'hus,  insurance  stock  never  rises  to 
the  value  of  bank  stock,  when  it  pays  the  same  interest, 
on  account  of  the  greater  risk.  Thus,  also,  steamboat 
stock  may  pay  twenty  or  thirty  per  cent.,  and  yet  sell  at 
no  advance  ;  that  is,  it  will  be  at  par,  because  of  the 
danger  from  fire  and  other  accidents,  and  from  the  rapid 
wear  of  the  principal. 

It  is  by  circumstances  like  these,  that  the  prices  of 
stocks  are  determined.  When  a  stock  sells  for  what  it 
cost  ;  that  is,  w  lien  a  hundred  dollars'  worth  of  the  orig- 
inal capital  sells  for  one  hundred  dollars,  that  stock  is 
sfid  to  be  at  par.  When  it  sells  for  more  than  this,  it 
is  said  to  be  above  par  ;  and  when  it  sells  for  less,  it  is 
said  10  be  belo^c  par.  Thus,  if  slock  be  sold  for  thirty- 
seven  per  cent,  above  par,  a  share  that  cost  one  hundred 
dollars,  sells  for  one  hundred  and  thirty-seven  dollars  ; 
that  is,  one  hundred  dollars  receives  an  interest,  which, 
at  the  ordinary  rate  of  money,  is  as  much  as  one  hun- 
dred and  thirty-seven  dollars  would  receive.  And  so  of 
any  other  case. 

Now,  it  must  at  once  be  perceived,  that  the  ojiinion 
of  the  value  of  stocks  is  made  up  very  much  from  ex- 
pectations of  profit  or  loss,  or  anticipations  of  increase 
or  diminutior.  of  risk.      Hence,  the  rumor  of  a  war  ;  of 


NATURE    AND    PRICE    OF    STOCKS.  337 

the  failure  of  a  company,  or  of  a  bank  ;  of  the  probable 
insolvency  of  a  government  ;  or  the  news  of  the  gain  or 
loss  of  a  battle,  may  make  a  very  considerable  diti'erence 
in  the  price  of  those  slocks  which  would  be  afl'ected  by 
such  information.  Hence,  the  great  liability  to  fraud,  in 
all  the  operations  of  the  stock  market.  If  a  capitalist 
can  get  up  a  rumor  which  will  depress  any  stock  two 
per  cerit.,  and  buy  one  hundred  thousand  dollars'  worth, 
during  this  depression,  he  may  sell  it  again  the  next  day, 
for  its  original  value,  and  thus,  in  the  course  of  twenty- 
four  hours,  realize  two  thousand  dollars,  witliout  either 
risk  or  trouble  ;  while  the  unfortunate  seller  is  cheated 
out  of  this  amount,  without  reason  and  without  remedy. 
I  do  not  say  that  all  rumors  afi'ecting  the  price  of  stocks, 
are  thus  fabricated.  I  only  say,  that  such  is  the  liabil- 
ity ;  and  it  is  not  very  unlikely,  that  what  can  so  readily 
be  done,  has  actually  happened.  And  when  such  ru- 
mors actually  arise  without  collusion,  it  requires  great 
sagacity  to  judge  of  the  probability  of  their  truth,  and 
thus  to  buy  or  sell,  according  to  the  true  judgment  to  be 
formed  from  the  facts  actually  in  possession  of  the  com- 
munity. 

And,  besides  this,  another  method  may  frequently  be 
resorted  to,  for  the  sake  of  transferring  money  from  the 
pockets  of  one  class  of  citizens,  into  those  of  another 
class.  Suppose  a  particular  stock  to  be  worth  no  more 
than  fifty  per  cent.  ;  that  is,  to  be  capable  of  yielding  no 
more  than  three  per  cent,  on  the  original  interest.  Sup- 
pose there  be  only  two  or  three  hundred  thousand  dol- 
lars' worth  of  this  stock  in  the  market.  If,  now,  a  few 
ind  viduals  of  large  wealth  combine  together,  they  may 
easily  buy  up  the  whole  of  it,  at  this  reduced  price. 
The  scarcity  will  at  once  excite  inquiry,  and  will  tend 
to  create  some  demand.  If,  now,  by  means  of  other 
agents,  they  put  small  quantities  of  it  into  the  market, 
and  buy  it  in  themselves,  at  gradually  increasing  prices, 
every  one  will  become  desirous  of  buying  this  stock, 
which,  for  a  succession  of  days,  has  been  rapidly  rising 
m  value.  By  careful  management,  it  may  thus  be 
raised,  in  a  few  days,  to  seventy-five  or  one  hundred 
29 


338  NATURE    AND    PRICE    OF    STOCKS. 

dollais  per  share.  If,  then,  these  present  owners  care 
fully  keep  up  the  price,  by  buying  liiile  and  selling 
much,  until  they  have  disposed  of  the  whole  of  their 
purchase,  they  will,  in  a  few  weeks,  find  themselves  to 
have  doubled  their  money.  In  the  mean  time,  the  cause 
of  this  rise  having  been  removed,  the  effect  ceases,  and 
the  present  holders,  who  have  purchased  at  seventy-five 
or  one  hundred  dollars  a  share,  find  that  their  stock  is 
worth  no  more  than  fifty  per  cent.  Thus,  fifty  dollars 
per  share,  is,  with  great  adroitness,  transferred  from  the 
pockets  of  the  many,  into  those  of  the  few,  and  many 
ar^^  ruined,  while  a  few  are  rendered  enormously  rich. 
I  again  say,  that  the  rise  and  fail  of  stocks,  are  not 
always  to  be  attributed  to  such  causes.  But,  every  one 
soon  sees  that  such  events  are  liable  to  happen.  Of  th(! 
honor  or  the  honesty  of  such  a  transaction,  it  is  not  ne- 
cessary here  to  speak.  We  will  only  take  occasion  to 
remark,  that  it  behooves  the  uninitiated,  who  wish  to 
escape  these  dangers,  to  be  somewhat  careful  how  they 
speculate  in  stocks. 


CHAPTER  THIRD, 

OF  THE  PRICE  OF  LAND,  OR  RENT. 

As  the  principal  demand  for  land,  is  for  the  purposes 
of  agricuhme,  we  shall  first  consider  Bent,  specially 
with  reference  to  this  form  of  utility. 

Land  is  the  instrument,  by  which  the  farmer  produces 
the  various  vegetable  and  animal  substances  which  he 
offers  in  exchange. 

Like  any  other  valuable  instrument,  it,  of  course, 
commands  a  price  according  to  its  productiveness.  He 
who  hired  a  loom,  would  pay  more  for  a  loom  with 
which  he  could  weave  twenty  yards  a  day,  than  for  one, 
with  which  he  could  weave  but  ten  yards  a  day.  The 
case  is  the  same  with  land. 

Now,  the  productiveness  of  land  is  made  up  of  two 
things  :    1st.    Fertility  ;  and,  2dly,  Situation. 

1.  Fertility.  We  all  know  that  the  productiveness 
of  different  soils  is  very  diverse.  Some  soils  will  pro- 
duce thirty,  or  forty,  or  fifty  bushels  of  wheat  to  the 
acre,  while  others  will  produce,  at  the  cost  of  more 
labor,  not  more  than  ten  or  fifteen  bushels  to  the  acre. 
Some  soils  will  produce  the  most  valuable  vegetables  ; 
and  others,  only  the  most  common,  and  comparatively 
worthless.  Some  soils  will  produce  no  wheat  whatever  ; 
and  others  will,  without  manuring,  produce  a  luxuriant 
crop,  every  year.  Some,  wholly  unfit  for  tillage,  can 
be  used  only  for  grazing  ;  and,  even  when  thus  em- 
ployed, yield  to  their  stinted  flocks,  but  a  meagre  sub- 
sistence. Hence,  we  see  a  reason  for  a  great  diversity 
in  the  price  of  land.  And  we  see,  at  once,  that  a  farmer 
might  more  profitably  |)ay  a  rent  for  one  farm,  than  oc- 
cupy another  farm  for  nothing. 

2.  Situation.  The  products  of  the  farmer  are  all 
bulky,  and,  of  course,  acquire  a  very  considerable  addi- 


340  PRICE  OF  LAND,  OR  RENT. 

tion  to  their  cost,  by  transportation.  Hence,  if  A,  raise 
wheat,  within  a  iwile  of  a  market  town,  and  sell  it  for  one 
dollar  a  bushel,  and  B,  live  one  hundred  miles  off,  and 
bring  his  wheat  to  the  same  market,  he  must  sell  it  at 
the  same  price.  The  merchant  who  buys  wheat  can 
give  no  more  than  the  market  price  for  wheat,  whether 
it  have  been  raised  near  or  far  otf.  It  is  no  more  valua- 
ble to  him,  for  having  been  brought  one  hundred  miles 
If,  now,  the  price  of  bringing  a  bushel  of  wheat  one  hun 
dred  miles  be  fifty  cents,  B,  actually  receives  but  fifty 
cents  a  bushel  for  his  wlieat,  while  A,  receives  a  dollar. 
If  the  farms  of  both  were  of  equal  fertility,  that  is,  if 
both  produced  twenty  bushels  to  the  acre,  the  farm  of 
B,  would  be  only  half  as  productive  as  that  of  A  ;  that 
is,  he  would  receive  only  ten  dollars  per  acre,  while  A, 
received  twenty  dollars.  This  amount  of  difference  in 
situation,  would  be  the  same  as  a  difference  of  one  half 
in  fertility,  or  actual   productiveness. 

Hence,  fertility  being  the  same,  productiveness  will 
be  as  situation  ;  and,  situation  being  the  same,  produc- 
tiveness will  be  as  fertility.  And  we  see,  that  these 
circumstances  will  always,  when  opposed,  counterbalance 
each  other  ;  that  is,  land  at  such  a  distance  from  the 
market  that  it  cost  one  half  the  price  of  products  to 
transport  them,  will  be  of  the  same  value,  or  actual  pro- 
ductiveness, as  land  of  half  its  fertility,  contiguous  to  a 
market.  And,  hence,  in  estimating  the  productiveness 
of  land,  these  circumstances  are  always  to  be  considered 
together.  And,  we  see,  that  land  of  the  greatest  fertil- 
ity may  be  so  far  from  a  market,  that  the  cost  of  trans- 
portation will  leave  a  profit  insufficient  to  re|)ay  the  cost 
of  cultivation.  In  such  a  case,  such  land  will  be  worth 
nothing. 

With  these  principles  in  mind,  we  can  easily  see  in 
what  manner  rent  will  be  paid,  for  the  different  lands  m 
a  country. 

1.  In  the  first  settlement  of  a  country,  land  is  of  no 
exchangeable  value  ;  for  every  one  may  have  as  much  as 
he  pleases.  ICvery  one,  therefore,  being  at  liberty  to 
choose  for  himsL-lf   wil)   select   such  a  portion  as  he  sup- 


PRICE  OF  LAND,  OR  RENT.  341 

poses  most  productive.  Under  these  circumstances, 
land  would  bring  no  rent ;  since  no  one  would  pay  anoth- 
er for  tlie  use  of  that  which  he  could  have  for  nothing. 
This  would  continue  to  be  the  case,  until  all  the  land  of 
the  first  qualiiy  was  occupied.  Let  us  suppose,  for  the 
sake  of  illustration,  that  this  first  quality  of  land  were 
capnble  of  producing  one  hundred  bushels  to  the  acre, 
and  were  all  contiguous  to  the  place  of  settlement,  and 
thai  the  second  quality  of  land  were  capable  of  produc 
ing  but  eighty  bushels  to  the  acre. 

2.  Suppose,  now,  this  settlement  to  increase  so  rap- 
idly that  the  inhabitants  could  no  longer  be  supplied  with 
products  from  the  land  of  the  first  class  ;  or,  that  these 
products  were  in  such  demand,  for  the  purpose  of  ex- 
change with  other  countries,  that  these  lands  could  no 
longer  yield  the  requisite  sup})ly.  The  price  of  grain 
would  rise,  so  that  a  farmer  could  su|)port  himself  by 
lands  of  the  second  quality  ;  and,  as  those  of  the  first 
quality  were  all  taken  up,  and  he  could  obtain  those  of 
the  second  quality  for  nothing,  he  will  proceed  to  occupy 
these.  Although  this  quality  of  land  would  bear  no 
rent ;  for  it  will  barely  support  him  ;  yet,  it  is  better 
than  starvation,  and  he  will  proceed  to  till  it.  But,  as 
soon  as  this  is  the  case,  the  lands  of  the  first  quality  will 
begin  to  command  a  rent ;  because,  it  is  as  well  for  a 
farmer  to  pay  twenty  bushels  a  year,  for  land  yielding 
one  hundred  bushels  an  acre,  as  to  have  land  producing 
only  eighty  bushels,  for  nothing.  And,  yet  more  :  As 
soon  as  land  will  pay  a  rent,  it  will  at  once  command  a 
price  ;  because,  if  a  man  wish  to  invest  capital,  he  will 
be  as  willing  to  pay  for  land  as  for  stocks,  or  any  thing 
else,  that  sum,  of  which,  at  the  ordinary  rate  of  piofits, 
the  rent  would  be  the  interest.  Thus,  if  land  pay  six 
dollars  a  year  rent,  per  acre,  if  money  be  at  six  per  cent 
interest,  it  is  worth  one  hundred  dollars  an  acre  ;  since 
six  dollars  is  the  interest  of  one  hundred  dollars.  And 
so,  if  the  occupier  have  the  capital,  it  is  as  cheap  for 
him  to  buy  the  land,  and  receive  the  interest  himself,  a& 
to  hold  the  money  himself,  and  pay  the  interest  to  another. 

3.  Suppose,  now,  the  price  of  grain^  either  f^r  home, 

29* 


342  PRICE  OF  LAND,  OR  RENT. 

or  for  foreign  consumption,  to  have  risen  so  much,  that 
tlie  lands  of  the  third  quahty,  or  producing  sixty  busnels 
per  acre,  could  now  be  tilled,  and  support  the  agricul- 
turist. As  soon  as  this  became  the  case,  lands  of  the 
second  quality  would  yield  a  rent  and  would  bear  a  pi-ice  ; 
because,  it  would  be  as  profitable  for  a  farmer  to  pay 
twenty  bushels  a  year  for  land  of  eighty  bushels,  as  to 
cultivate  land  of  sixty  bushels  for  nothing.  And,  as 
soon  as  land  of  the  second  quality  brought  a  rent,  the 
rent  of  land  of  the  first  quality  would  also  sustain  a  cor- 
responding rise.  It  would  be  as  cheap  for  a  farmer  to 
pay  forty  bushals  a  year  for  land  of  one  hundred  bushels, 
as  twenty  for  and  of  eighty  bushels,  or  as  to  have  land 
of  sixty  bushels  for  nothing. 

4.  It  is  evident,  that  as  the  settlement  of  the  country 
advanced,  rent  and  the  price  of  land  would  go  on  aug- 
menting, according  to  these  principles.  Land,  which 
will  merely  support  the  cultivator,  will  bear  no  rent. 
But,  all  land  of  a  greater  productiveness  than  this,  will 
yield  some  rent  ;  and,  this  rent  will  be  precisely  as  its 
productiveness  exceeds  that  of  the  poorest  soil  which  is 
worthy  of  cultivation.  And,  so  soon  as  any  soil  is  tilled 
of  a  poorer  quality  than  any  which  was  tilled  previously, 
all  the  soils  of  a  better  quality  will  rise  in  rent,  and  in 
price  accordingly. 

5.  Suppose  the  land  of  any  nation  to  be  limited  by 
situation,  or  by  territorial  lines  ;  it  is  evident  that  the 
demand  for  food,  increasing  with  the  increase  of  the 
number  of  inhabitants,  the  land  would,  in  time,  be  all 
occupied.  As  soon  as  the  poorest  land  was  capable  of 
yielding  something,  besides  supporting  iis  inhabitants,  it 
would  also  pay  rent.  And  thus,  as  before,  the  price 
and  the  rent  of  land  would  go  on  increasing,  until  it  was 
arrested  by  some  counteracting  cause.  Such  causes  are 
the  following  :  If  the  grain  were  exported,  its  rise  of 
price  would  gradually  limit  the  foreign  consumption  ; 
since  other  nations  would  begin  either  to  raise  it  them- 
selves, or  to  procure  it  elsewhere.  Or,  if  trade  were 
free,  as  soon  as  its  price  rose  so  high  that  the  nation 
itself  could  procure  its  supplies  cheaper  abroad  than  at 


PRICE  OP  lanij,  or  rent.  343 

home,  it  would  import  instead  of  raising  it.  As  soon  as 
this  became  the  case,  the  price  ol  grain  would  rise  no 
iiigher  ;  and,  at  whatever  rale  of  rent  this  kind  of  land 
may  have  been  wlien  this  change  took  place,  from  this 
time  it  would,  at  that  rate,  remain  stationary. 

6.  It  is,  however,  to  be  observed,  that  this  ellect 
upon  the  occupation  of  land,  would  be  rather  a  cl  ange 
in  the  manner  of  use,  than  in  the  utility  of  the  land  itself. 
It  is  evident  that  it  could  aflect  tiie  demand  for  land, 
only  for  the  production  of  those  commodities  that  are 
capable  of  distant  transportation,  such  as  bread  stufls  in 
general.  But  a  very  large  part  of  the  productions  of  the 
earth  are  not  capable  of  such  transportation  ;  such  are 
butcher's  meat,  which  forms  so  large  a  portion  of  the 
food  of  man  ;  green  vegetables  ;  milk  and  butter  ;  and 
the  food  of  animals,  both  for  slaughter  and  labor.  Just 
in  proportion  as  a  population  increases,  the  demand  for 
all  these  will  increase  likewise.  Hence,  it  is  reasonable 
to  suppose,  that  although  the  importation  of  foreign  grain 
che(;ked  the  growth  of  domestic  grain,  the  increased  de- 
mand for  thei-e  other  domestic  products,  would  keep  the 
urices  of  land  in  a  state  of  progressive  increase. 

Besides.  It  is  evident  that  the  demand  for  these  re- 
cent and  unlransporlable  i)rodnctions  of  the  earth,  must 
be  in  proportion  to  the  numl)er  and  the  wealth  of  the 
population.  We  have  already  siiown,  that  the  number 
of  the  population  must  be  as  the  means  of  subsistence. 
Hence  the  cheaper  grain  and  bread  stuffs  are,  the  more 
rapid  will  be  the  increase  of  population,  and  the  greater 
will  be  the  demand  for  those  product^,  of  which  the 
agriculturist  at  home  must,  from  his  locality,  enjoy  the 
monopoly.  Hence  it  may  reasonably  be  doubled 
whether  the  corn  laws  of  Great  Britain,  of  whicii  tha 
object  is,  to  keep  up  the  price  of  land,  and  to  sustair 
the  agricultural  interest,  have  really  had  this  effect ;  and. 
whether  they  have  not,  in  reality,  had  the  contrary  effect. 
Had  the  price  of  corn  been  as  low  as  it  might  have  been, 
for  the  last  fifty  years,  but  for  the  duties  on  imported 
grain,  the  [lopulat/'on  of  Great  Britain  would  have  been 
probably  doubled    both  from  the  greater  cheapness  of 


344  PRICE  OF  LAND,  OR  RENT. 

living,  and  also  from  the  stimulus  given  to  her  manufac- 
tures, by  the  dimiuislied  price  of  ail  her  products,  and  the 
demand  for  her  manufactures  to  pay  for  the  corn  that  she 
imported.  In  this  case,  the  increased  demand  for  all 
the  recent  productions  of  the  earth,  would  have  been 
more  than  equal  to  all  the  benefit  which  even  the  agri- 
culturist is  supposed  to  have  reaped,  from  the  exclusior 
of  foreign  bread  stuffs.  If  this  be  so,  it  is  another  illus- 
tration of  the  universal  law,  that  a  selfish  policy  always  in 
the  end  defeats  itself;  and  reaps  its  full  share  of  the 
gratuitous  misery  which  it  inflicts  upon  others. 

7.  From  the  view  which  has  been  taken;  it  would  al 
first  seem,  that  the  point  of  earliest  settlement  of  a  coun- 
cry,  or  at  least  its  maritime  frontier,  would  be  its  centre, 
where  land  would  be  of  the  highest  price  ;  while  all  the 
lands  of  the  interior,  in  proportion  as  they  receded  from 
it,  would  gradually  decrease  in  value,  until  the  cost  of 
transportation  of  products,  at  last  reduced  their  value  to 
nofhing.  Such  would  be  the  case,  were  it  not  for  vari- 
ous circumstances,  which  greatly  modified  this  result. 
Some  of  these  modifying  circumstances,  it  is  important 
to  rxotice. 

1.  As  a  people  are  thus  spread  over  a  large  territory, 
and  are  devoted  to  agriculture,  it  becomes  necessary  that 
other  persons  should  devote  themselves  to  manufactures, 
and  to  barter  and  sale.  Those  who  are  thus  employed, 
by  necessity  collect  together,  into  towns  and  villages. 
Thus  a  large  population  is  collected,  which  raises  noth- 
ing from  the  earth  ;  and  hence,  their  wants  must  be  sup- 
plied by  the  agriculturists  in  their  neighborhood.  Hence, 
immediate  markets  for  produce,  are  created  in  every 
distr4ct  ;  that  is,  although  the  farmer  cannot  remove  his 
farm  nearer  to  the  market,  the  market  has  removed  near- 
er to  him  ;  and  the  diminution  of  distance  has  increase(} 
the  productiveness  of  his  farm,  as  much  as  though  its 
fertdity  had  been  iiu'reased,  or  it  had  been  removed  to 
the  sea-board.  It  is  not  fifty  years,  since  land  in  the 
vicinity  of  Utica,  New  York,  was  valuable  only  for  rais- 
ing produce,  which  was  sent  to  the  city  of  New  York, 
by  the  way  of  Albany;  and  the  rent,  and  consequent 


PRICE  OF  LAND,  OR  RENT.  340 

price  of  land,  depended  on  what  could  be  made  by  a 
harvest,  after  deducting  from  the  market  price  of  wheat, 
in  New  York,  the  cost  of  transportation  between  tl)e 
two  places.  But,  while  the  hmd  lias  remained  unmoved^ 
population  has  moved  toward  it;  and  Utica  itself  is  a 
pojjulous  city,  demanding,  for  its  supplies,  the  produc- 
tions of  all  the  surrounding  country  ;  so  that  land,  in  its 
vicinity,  bears,  1  presume,  a  very  considerable  propor 
tion  to  the  i)rice  of  land  in  the  vicinity  of  the  city  of 
New  York  itself. 

2.  1  have  mentioned  above,  that  productiveness  of 
land,  depended  not  only  on  ferlilily^  but  als»  on  situu' 
tion^  or  facility  of  a  communication  with  a  market.  Fer- 
tility being  given,  productiveness  will  be  as  situation  ; 
that  is,  the  greater  the  ease  of  transportation,  the  greater 
the  actual  pioductiveness  ;  and,  of  course,  the  higher 
the  value  of  land.  Thus,  if  land  produce  one  hundred 
bushels  per  acre,  and  it  costs  half  its  market  price  to 
convey  it  to  the  place  of  sale,  it  is  only  as  valuable  as 
land  of  half  its  fertility,  contiguous  to  the  market.  If, 
then,  the  cost  of  transportation  can  be,  by  any  means, 
reduced,  the  productiveness  of  lands,  affected  by  this 
reduction,  will  rise  in  proj)ortion*.  If,  when  the  price 
of  wheat  is  a  dollar,  it  cost  fifty  cents  to  transport  it, 
and  the  cost  of  transportation  can  be  reduced  to  twenty- 
five  cents,  it  is  as  good  to  me,  as  if  the  price  had  been 
raised  twenty-five  cents,  or  my  land  had  increased  fifty 
per  cent,  in  fertility.  Now,  in  the  progress  of  a  coun- 
try, great  improvements  aie  generally  effected  in  roads, 
and  the  oidinary  modes  of  transportation,  by  which  the 
value  of  the  lands  at  a  distance  is  generally  enhanced. 
This  result  is,  however,  signally  effected  by  canals  and 
railroads.  The  effect  of  these  means  of  transportation 
is,  to  raise  the  prices  of  products  in  the  mterior,  and,  of 
course,  the  price  of  land  in  general,  in  the  manner  above 
stated.  A  very  intelligent  gentleman  of  Geneva,  New 
York,  informed  me,  that  in  the  year  1821,  the  price  of 
wheat  in  that  town  was  thirty-one  cents  per  bushel.  In 
1822,  the  price  was  thirty-seven  and  a  half  cents.  The 
canal  was  opened  during  the  next  year,  and  it  rose  to 


346  PRICE  OF  LAND,  OR  RENT. 

sixty-two  and  a  half  cents.  It  has  never  since  fallen  be 
low  this  latter  price,  and  at  tlie  time  of  the  conversation, 
133.3,  it  was  selling  at  one  dollar  and  thirty-one  cents 
per  bushel.  The  price  of  land,  of  course,  has  arisen  in 
proportion.  And  this  change  has  been  for  the  benefit 
of  all  parties.  The  farmer  is  greatly  enriched,  the  la- 
borer is  better  paid,  a  greater  number  of  persons  are 
very  profitably  employed  and  supported  by  labor  on  the 
canal,  and  wheat  has  been  sold  at  a  lower  price  to  the 
consumer,  than  ever  before. 

So  far  as  we  have  treated  of  this  subject,  we  have 
considered^the  fertility  of  land,  as,  on  an  average,  equal  ; 
and  the  facility  of  communication  gradually  diminishing, 
with  the  increase  of  the  distance.  Under  these  circum- 
stances, it  is  manifest,  that  the  price  of  land,  in  the  inte- 
rior, could  not  rise,  unless  the  price  of  land  on  the  sea- 
board had  first  risen.  And,  as  land  came  into  market, 
further  and  further  from  the  old  settlements,  it  would  al- 
ways indicate  a  rise  of  price  in  the  land  which  had  first 
been  cultivated  ;  or  in  the  most  favorable  localities. 

But  it  is  manifest  that  the  case  may  be   far  otherwise. 

1.  The  land  in  the  interior  may  be  the  most  fertile, 
and  may  enjoy  the  most  favorable  climate.  The  in- 
creased /erii7t7^,  will,  of  course,  counterbalance  within  a 
certain  limit,  the  incowenience  of  situation  ;  and  mild- 
ness of  climate,  will  render  a  less  exertion  necessary  to 
procure  the  necessary  provisions  for  the  sustentation  of 
animal  life.  Hence,  the  profit  of  labor  will  be  greater, 
and  the  difference,  in  these  respects,  may  be  such,  as  to 
counterbalance  entirely,  within  a  given  distance,  the  dis- 
advantages of  position.  In  this  case,  the  interior  will  be 
settled  without  advancing  the  price  of  land  on  the  sea- 
board. The  advantages  of  both,  though  dissimilar,  are, 
so  far  as  productiveness  is  considered,  equal ;  and,  of 
course,  there  is  no  reason  why  any  one  should  pay  any 
thing  for  a  choice. 

And,  secondly,  as  I  have  shown  before,  the  difficulty 
of  transportation  may  be  so  reduced,  that  it  forms  but  a 
small  part  of  tlit  cost  of  whatever  is  raised  in  the  inte- 
rior.     When  it  costs  but  a  few  cents  more  a  bushel,   to 


PRICE  OF  LAND,  OR  RENT.  34? 

transport  vvlient  three  limidred  miles,  than  fifty  i.iiles,  and 
ihe  fertility  of  land  three  hundred  miles  liom  llie  market, 
IS  twice  as  great  as  ihat  in  the  vicinity,  it  is  evident,  that 
(he  productiveness  of  land  three  hundred  miles  off,  will 
1)6  greater  than  of  tl)at  only  fifty  miles  from  the  market 
Hence,  the  price  of  the  one  might  rise,  without  produc 
ing  a  rise  in  the  price  of  the  other.  Nay,  it  is  evident, 
that  it  might  produce  a  contrary  effect.  If  a  farmer  in 
the  interior  could  raise  wheat  at  a  fair  profit,  and  bring 
it  to  market  for  one  dollar  a  bushel,  and  the  farmer  in 
the  ntiighborhood  of  the  market  could  not,  at  a  fair  profit, 
sell  it  (or  less  than  one  dollar  and  twenty-five  cents,  as 
the  latter  must  sell  his  wheat  at  the  current  price,  of 
course,  he  coidd  not  raise  it  at  all.  Hence,  as  a  source 
of  profit  is  cut  olf,  the  annual  produce  is  legs,  and  the 
price  of  land  will  fall. 

Such  has  been,  to  some  extent,  the  course  of  events 
in  this  country.  The  lands  on  the  sea-board  were  first 
settled,  and  cultivation  gradually  extended  to  the  west. 
At  first,  the  average  fertility  of  the  lands  newly  occupied, 
was  no  greater  than  that  of  those  first  cultivated  ;  and 
the  price  of  the  old  lands  rose,  as  the  new  lands  were 
occupied.  By  degrees,  cultivation  passed  over  the  Al- 
leghany mountains,  and  entered  the  Valley  of  the  Missis- 
sippi. Here  the  soil  is  exuberantly  fertile,  and  the  cli- 
mate mild  ;  but,  the  difficulty  of  communication  with  the 
interior,  operated  as  a  severe  check  ujjon  the  growth  of 
the  new  States,  and  the  price  of  lands  in  the  old  Stales 
was  not  materially  affected.  As  soon,  however,  as  the 
use  of  steam  opened  the  navigation  of  the  I\Iississi|)pi, 
the  whole  scene  was  changed.  'The  iidand  States  be- 
came, in  position,  almost  sea-board  States.  Their  ^ei 
tility  was  relieved  from  the  inconveniences  of  position, 
under  which  it  had  formerly  labored  ;  and  the  produc- 
tions of  a  new  and  rich  soil  could  be  brought  to  market, 
with  as  little  cost  for  transportation,  as  that  of  landi 
within  one  or  two  hundred  miles  from  the  sea-board 
The  result  has  been,  that  the  western  farmers  have  un- 
dersold the  farmers  of  the  north  and  east  ;  and  now, 
but  little  wheat  is  raised  in  any  part  of  New  England 


848         PRICE  OF  LAND,  OR  RENT. 

This  result  has  been  increased,  by  the  vast  emigration 
to  the  west,  vvliich  has  diminished  tlie  number  ot"  labo- 
rers ;  and  by  demand  for  laborers  at  the  east  for  man- 
ufactures and  internal  improvements,  which  has  with- 
drawn men  from  agriculture,  and  raised  the  v\ages  of  ag- 
ricultural labor  in  the  New  England  States.  Hence,  bj 
the  increased  wages  of  labor,  and  the  reduced  price  of 
grain,  the  profit  of  agriculture  has  been  reduced,  and  the 
price  of  land  has  fallen.  I  suppose  that  land,  at  present, 
in  New  England,  for  the  ordinary  purposes  of  agricul- 
ture is  not  generally  as  dear  as  it  was  twenty  or  thrly 
years  since. 

Yet,  it  by  no  means  follows,  that  this  depreciation  w  ill 
increase.  The  settlement  of  the  Western  Slates  creates 
a  vast  market  for  manufactures,  and  a  vast  demand  for 
mercantile  exchanges.  These  require  capital,  which  is 
more  abundant  in  the  older  Slates.  The  older  States, 
also,  have,  by  nature,  greater  facilities  for  such  employ- 
ments. Hence,  the  Western  Slates  will  become  iheir 
customers,  and  the  older  States  will  become  thickly 
peopled  with  a  manufacturing  and  mercantile  population. 
Land  will  be  in  demand,  for  supplying  the  immediate 
wants  of  such  a  population,  and  it  will  probably  again 
soon  rise.  Each  manufacturing  establishment  will  be- 
come a  centre,  which  will  confer  a  high  value  on  land 
in  its  immediate  vicinity.  By  the  multij)licalion  of  such 
centres,  the  price  of  the  whole  will  be  augmented. 

I  have  thus  far  considered  the  {)rice  of  land,  only  in 
so  far  as  its  mere  productiveness  is  concerned,  'i'his 
will,  of  course,  be  the  most  ordinary  and  general  cause 
of  the  variation  in  its  price,  and  in  its  rent,  'i'liere  are, 
however,  other  circumstances,  which  have  a  materia) 
eflect  upon  its  value,  even  in  the  same  country,  and  un- 
der substantially  the  same  laws. 

1.  Beauty  of  situation.  Of  two  farms  equally  pro- 
ductive, many  men  would  give  a  decided  preference  to 
that  which  connnanded  a  view  of  the  richest  and  most 
beautiful  prospect,  or  of  which  the  trees  and  shrubbery 
were  so  arranged,  as  to  give  the  greatest  pleasure  to  the 
beholder.      For   this   preference,  most   men   would    be 


PRICE  OF  LAND,  OR  RENT.  349 

willing  to  pay  a  considerably  additional  price.  This  ad- 
ditional price  will  increase  with  the  wealth  and  the  iin- 
provMng  tastes  of  the  coinniunity.  This  is  a  circum- 
stance which  slionld  always  be  borne  in  mind  by  the 
occupiers  and  owners  of  land.  It  costs  but  little  more 
labor  to  lay  out  an  orchard  regularly  and  beauiifully, 
than  to  lay  it  out  irregularly  and  clunisily.  It  costs 
nothing  to  let  a  tree  stand,  where  it  adds  beauty  to  a 
prospect,  and  it  costs  very  little  to  plant  one,  where  it 
will  have  the  same  etfect.  A  neat  and  convenient  house, 
consumes  neither  more  lumber,  nor  nails,  nor  labor,  than 
a  slovenly  and  inconvenient  One.  And  yet,  on  these 
differences,  very  much  of  the  exchangeable  value  of  a 
farm  depends. 

2.   The  price  of  land  depends  much  on  the  intellectu- 
al and  moral  character  of  a  neighborhood. 

Of  two  farms  of  equal  productiveness,  but  in  very  dis- 
similar moral  and  intellectual  communities,  almost  every 
one  would  prefer  that,  which,  in  these  respects,  possess 
ed  the  greater  advantages.  A  man  who  has  in  any  de- 
gree cultivated  his  own  intellect,  prefers  the  society  of 
those  whose  intellects  are  also  cultivated.  A  parent 
would  always  prefer  a  neighborhood  in  which  his  children 
would  receive  the  advantages  of  education.  A  man  who 
had  been  accustomed  to  religious  observances,  would 
choose  to  remove  where  he  could  enjoy  the  benefits  of 
religious  instruction.  And  every  man,  let  his  disposi- 
tions be  what  they  may,  will  choose  to  reside  in  a  neigh- 
borhood, in  which  the  moral  character  of  the  people  is  a 
protection  from  dishonesty  and  robbery  ;  and  where  his 
children  will  be,  as  little  as  possible,  exposed  to  the 
contamination  of  vice.  It  is  manifest,  that  each  of  these 
considerations,  would  form  a  ground  of  preference  for 
one  situation  over  another,  and  for  this  preference,  every 
reasonal)le  man  woidd  be  willing  to  pay.  Were  two 
farms  thus  difFerenlly  situated,  there  would  be  many 
more  buyers  for  the  one  than  for  the  other,  and  the  ad- 
vantage would  all  be  on  the  side  of  the  most  intelligent 
and  moral  community. 

Hence  we  see,  that,  besides  the  advantages  which  in- 
30 


350  PRICE  OF  LAND,  OR  RENT. 

telligence  and  virtue  confer  upon  the  character  of  a  peo 
pie,  there  is  also  an  additional  advantage,  in  the  increas- 
ed value  of  property  which  they  produce.  It  may  be 
fairly  questioned,  whether  this,  of  itself,  be  not  sufficient 
to  repay  the  whole  expense  of  literary  and  religious  in- 
stitutions. There  are  towns  in  New  England  in  which, 
within  a  few  years,  the  price  of  real  estate  has  doubled, 
for  no  other  assignaLle  reason,  than  that  of  the  literary 
and  moral  advantages  which  they  hold  out  to  residents. 
This  mode  of  increasnig  the  value  oi  property,  seems  to 
me  deserving  of  more  attention  than  it  has  generally  re- 
ceived. 

Land  is  used  for  other  purposes  besides  residence  and 
agriculture.  The  principles  upon  which  its  value  is  de- 
termined, in  such  cases,  are  substantially  the  same  as 
those  mentioned  above. 

1.  Thus,  in  cities,  land  for  the  erection  of  buildings 
has  a  two  fold  value;  1st,  for  dwelling  houses  ;  and, 
2dly,  for  ware  houses,  and  places  for  the  transaction  of 
business.  Its  value,  in  both  of  these  respects,  depends 
not  on  fertility.,  as  it  is  not  wanted  for  cultivation,  but 
wholly  on  situation.  A  man  needs  a  house  which  will 
fijrnish  the  necessary  conveniences  for  his  fiimily.  He 
also  wishes  one,  within  a  convenient  distance  from  his 
place  of  employment.  The  further  his  dwelling  is  re- 
moved from  his  shop  or  his  counting  room,  the  longer 
time  is  occupied  in  passing  from  the  one  to  the  other,  and 
the  less  are  the  conveniences  of  his  residence.  Hence, 
he  will  be  willing  to  pay  for  the  choice,  and  thus  the 
price  of  land  gradually  diminishes  from  the  centre  to  the 
circumference  of  a  thickly  settled  town. 

But,  in  a  place  of  mercantile  business,  edifices  have 
another  value,  besides  that  of  dwelling  houses.  They 
are  needed  for  the  transaction  of  business.  Where  many 
exchanges  are  to  be  made,  in  the  course  of  a  few  hours, 
every  day,  it  is  of  importance  that  the  exchangers  should 
be  as  near  together  as  possible.  And,  where  a  large 
number  of  strangers  is  daily  collected  for  the  sake  of 
making  purchases,  it  is  important  to  the  seller,  to  be  so 
situated  as  to  be  in   their   immediate   vicinity.     A   mer* 


PRICE    OF    LAND,     OR    RE^T.  35l 

chant  whose  store  is  in  the  centre  of  business,  can  easily 
sell  ten  times  as  niucli  in  a  day  as  one  who  is  half  a  mile 
off"  from  the  centre.  Hence,  he  is  able,  from  the  mere 
fact  of  diilerence  in  situation,  to  realize  a  much  greater 
annual  profit  in  the  one  place  than  in  the  other.  For 
this  di/ference  of  productiveness,  he  will  be  willing  to 
pay  a  price  ;  and,  hence,  in  large  cities,  the  most  cen- 
tral situations,  or,  as  they  are  called,  the  best  stands  for 
business,  command  a  very  high  rent  ;  and  a  correspon 
dent  price.  A  few  square  feet  of  land  in  the  centre  ol 
the  city  of  New  York,  will  sell  for  more  than  many  acres 
of  the  most  productive  soil  in  any  part  of  the  Union 
And,  as  the  price  of  land,  in  such  cases,  is  owing  entirely 
to  the  demand  for  the  purposes  of  facilitating  trade,  it 
can  only  rise  with  the  increasing  prosperity  of  the  place. 
Hence,  the  rise  or  fall  of  real  estate,  in  any  town,  if  it 
be  truly  a  rise  in  value,  and  not  a  rise  from  speculation. 
is  one  of  the  surest  indications  of  its  mercantile  prosper- 
ity, or  of  the  reverse.  And,  moreover,  the  rise  of  rents, 
in  any  given  place,  proceeds  upon  the  same  principles  as 
those  which  we  have  already^  illustrated.  Suppose  the 
places  of  business,  in  a  town,  to  be  all  occiij)ied,  with- 
in a  given  circle,  and  that  they  are  sufficient  for  the  ac- 
commodation of  all  the  merchants  who  need  them.  If 
the  town  be  prosperous,  in  five  years,  these  accommo- 
dations will  be  insufficient,  and  buildings  without  this 
circle  will  come  into  demand  for  this  purpose.  Their 
rent,  in  consequence  of  this  additional  value,  will  rise. 
But  this  rise  will  be  accompanied  by  a  rise  in  the  rent 
of  the  more  favored  situations.  Those  persons,  whose 
employment  requires  a  central  situation,  will  occupy  the 
centre,  at  a  price  which  will  exclude  those  to  whom 
such  a  situation  is  less  essential,  and  this  process  will  go 
on,  until  those  who  are  the  least  able  to  come  into  com- 
petition, pass  out  of  the  original  circle,  and  thus  create 
a  new  demand,  and  raise  the  price  of  rent  as  it  has  been 
before  suggested. 

2.  Land  frec[rently  possesses  an  additional  value,  ni 
consequence  of  its  proximity  to  waterfalls.  A  water- 
fall provides  for  the  manufacturer,  a  constant  supply  o' 


352  RENT    OF    MINES. 

momentum,  which  he  can  use  by  means  of  very  simple 
machinery.  Suppose  the  interest  of  capital  employed 
in  the  construction  of  furnaces,  and  steam  machinery, 
and  the  annual  expense  for  fuel  and  attendance  in  a 
given  situation,  were  one  thousand  dollars,  and  the  same 
power  could  be  procured  at  the  same  place,  Ijy  ap- 
propriating a  waterfall,  by  means  of  machinery,  of  which 
the  interest  was  no  more  than  one  hundred  dollars  ;  the 
labor  of  the  waterfall  would  be  worth  nine  hundred  dol- 
lars per  year.  Hence,  supposing  it  to  be  in  a  situation 
in  which  there  was  a  demand  for  this  power,  the  land 
which  gave  the  legal  right  to  the  use  of  it,  would  possess 
a  value  proportioned  to  the  value  of  the  power.  Of 
course,  the  price  which  it  would  command,  would  de- 
pend upon  the  annual  value  of  the  privilege.  This 
would  be  determined  by  the  amount  of  applicable  pow- 
er, and  by  the  situation.  A  power  sufficient  to  move  a 
dozen  mills,  would  be  twelve  times  as  valuable,  as  that 
which  could  move  only  one.  A  water  power  near  the 
sea-board,  would  be  much  more  valuable  than  one  in  the 
interior.  If  it  were  at  tide  w^ater,  its  annual  value  would 
be  equal  to  the  difference  between  its  annual  expense 
and  that  of  steam.  If  it  were  at  a  distance  from  tide 
water,  or  the  market,  it  would  be  equal  to  this  differ- 
ence, minus  the  expense  to  be  incurred,  in  the  trans- 
portation of  the  material  and  of  the  manufactured  fabric. 
As  soon  as  the  cost  of  transportation  was  equal  to  the  dif- 
ference of  expense  between  the  two  modes  of  jjroducing 
power,  it  would  become  valueless  ;  because  it  would  be 
as  cheap  to  erect  a  manufactory  at  tide  water,  and  pay 
the  expense  of  building  and  fuel,  as  to  have  the  power 
for  nothing,  and  pay  the  same  expense  for  transporta- 
tion. Hence,  in  the  erection  of  mills  and  the  establish- 
ment of  manufactures,  both  of  these  circumstances  are 
to  be  maturely  considered,  before  a  situation  is  decided 
upon.  For  want  of  such  consideration,  much  property 
has  been  totally  lost. 

3.  J[Iines.  These  depend  upon  the  same  principles 
as  those  which  have  been  already  illustrated.  A  water 
privilege  is  a  mine  of  power,  a  bed  of  ore  is  a  mine  of 


RENT    OF    MINES.  3o8 

metal.      The  ft  rmer  is  frequently  the  most  valnuble  j)Os- 
session. 

Suppose  a  farm  to  be  worlli  tlie  ordinary  juice  t)f 
land  ;  and  the  owner  discovers  on  it  a  bed  of  i)on  ore, 
ivhich,  after  dechicting  the  necessary  expenses  of  work- 
ing it,  and  paying,  tlie  labor  and  skill  necessary  to  the 
operation,  will  yield  one  thousand  dollars  a  year.  The 
farm  or  the  land  necessary  for  the  mining  operations, 
(vill  rent  for  one  thousand  dollars  a  year,  or  will  sell  for 
such  a  sum  as  will  yield,  at  the  ordinary  rate,  one  thou- 
sand dollars  as  interest.  In  this  case,  it  is  manifest  that 
the  original  owner  of  the  property  will  be  a  gainer  by  the 
discovery,  to  the  full  amount  of  the  increase  in  the  price 
of  his  land.  But,  here,  the  peculiar  gain  ceases.  To 
other  holders  who  may  come  after  him,  it  is  merely  an 
investment,  of  the  same  nature  as  any  other  invest- 
ment ;  and  will  yield  no  more  than  the  ordinary  rate  of 
profit. 

The  case  is  the  same  with  a  copper,  a  silver,  or  a 
gold  mine.*  The  owner  of  the  land  at  the  time  of  the 
discovejy,  becomes  greatly  enriched,  in  consequence  of 
this  new  product,  which  may  be  derived  from  his  prop- 
erty. But,  after  this  rise,  when  a  new  purchaser  comes 
into  possession,  the  pecxdiarity  of  the  gain  ceases.  A 
rich  gold  mine  will  rent  or  will  sell  for  more  than  a  poor 
one,  and  its  price,  or  its  rent,  will  be  in  exact  ])ropor 
tion  to  rts  productiveness,  just  as  a  farm,  a  mill  privi- 
lege, or  any  other  property.  It  is  a  somewhat  remark- 
able fact,  that  mines  of  the  precious  metals  are,  in  gen- 
eral, singularly  unprofitable,  after  they  have  passed  out 
of  the  hands  of  the  original  owners.  It  has  grown  into 
n  proverb  in  South  America,  that  if  a  man  own  a  cop- 
per mine  he  will  grow  rich,  if  he  ow'n  a  silver  mine  he 
will  gain  nothing,  but  if  he  own  a  gold  mine  he  will  cer- 
tainly be  ruined.  The  fact,  however,  ma)^  be  easily 
accounted  for.  The  imaginations  of  men  are  always 
strongly  excited  by  the  contemplation  of  the  precious 
metals,  and  it  is  rare  that  any  thing  but  experience  can 
teach  tl.eni,  that  they  may  buy  gold  too  dear.  Hence, 
tiiey  do  not  coni])ute  the  chances  of  profit  in  the  pro- 
30* 


354  INTEREST    ON    REAL    ESTATE. 

duction  of  gold,  as  coolly  as  they  do  in  any  other  case. 
But  the  production  of  gold  is  governed  by  as  fixed  laws, 
as  the  production  of  wheat.  Gold  cannot,  any  more 
than  wheat,  be  produced  by  an  effort  of  the  imagination. 
It  is  the  result  of  labor,  and  skill,  and  expense.  And, 
if  these  be  greater  than  the  revenue,  a  man  will  as  as- 
suredly be  ruined  by  producing  gold,  as  by  condwcling 
any  other  unprofitable  business  ;  his  imagination  to  the 
contrary  notwithstanding. 

The  interest  of  land,  or  real  estate  in  general,  is  com- 
monly less  than  that  of  other  property  ;  that  is,  if  any 
particular  stock  costs  one  hundred  dollars,  and  yields,  as 
interest,  but  three  per  cent.,  it  would  not  sell  for  one 
hundred  dollars,  but  for  fifty  or  sixty  dollars.  But  land 
which  costs  one  hundred  dollars,  although  it  yield  but 
three  per  cent.,  will  sell  for  ninety  or  one  hundred  dol- 
lars. That  is,  men  are  willing  to  receive  less  interest 
for  capital  in  land,  than  other  property.  It  maybe  worth 
while  to  suggest  the  reason  of  this  difference. 

1.  Property  in  land,  is  considered  more  secure  than 
any  other  property.  The  principal  may  be  considered 
indestructible.  Hence,  it  is  the  safest  of  all  invest- 
ments, and  nothing  is  paid  for  the  risk. 

2.  The  title  to  land  can  be  more  definitely  secured, 
than  that  of  any  other  property.  The  legal  instruments, 
by  which  it  is  secured  to  the  individuals,  are  a  matter  of 
public  record.  The  boundaries  of  land,  can  be,  and 
commonly  are,  ascertained  with  entire  precisicn.  The 
land  itself  cannot  be  remo\ed.  Hence,  the  ownership 
of  it  can  be  always  ascertained  and  conveyed  to  pos- 
terity. 

3.  Men  generally  derive  some  influence  and  consid- 
eration from  the  ownership  of  land,  which  they  do  not 
derive  from  any  other  possessions.  In  many  places,  the 
right  of  suffrage  is  restricted  to  landholders.  Where 
this  rule  exists,  it,  of  course,  shows  the  degree  of  con- 
sequence which  is  attached  to  this  sort  of  possession. 
And  the  fact,  that  it  has  so  frequently  existed,  while  the 
contrary  rule  has  never  existed,  shows  the  general  ten- 
dency upon  the  subject 


DISTRIBUTION    ILLUSTRATED.  355 

4  Tliere  is,  T  think,  in  the  liuman  race,  a  strong  dis- 
poiiiion  to  become  the  owners  of  land  ;  an(J  a  natural 
love  to  the  pursuit  of  agriculture.  Men  of  all  profes- 
sioiis^look  forward  to  some  period  of  life,  in  which,  re- 
lieved from  the  toils  of  lousiness,  they  may  retire  to  the 
quiet  country.  To  whatever  extent  this  disposition  ex- 
ists, It  of  course  tends  to  raise  the  price  of  land,  above 
that  of  other  property,  paying  the  same  rate  of  profit. 
If  a  man  receive  a  part  of  his  remuneration  in  pleasure, 
he  will  be  content  to  receive  less  in  the  form  of  money. 

5.  And,  lastly,  the  natural  progress  of  society  tends 
to  increase  the  value  of  landed  property.  This  has 
been  already  illustrated  in  general,  in  the  remarks  which 
have  been  made  upon  rent.  And  it  must  be  evident, 
that,  land  remaining  the  same,  and  the  population  con 
tinually  increasing,  the  demand  for  land  must  continually 
mcrease.  And,  besides  this,  the  progress  of  society 
creates  not  only  a  more  extensive  demand  for  land,  but 
a  much  greater  variety  of  demands.  As  such  is  the 
tendency,  men  are  willing  to  hold  land  at  a  less  interest 
than  other  property,  in  the  hope  that  the  rise  of  price  at 
some  future  time,  will  compensate  for  their  present  loss. 
Thus,  men  frequently  invest  money  in  wild  lands,  ex- 
pecting to  reap  no  profit  from  them  for  many  years,  but 
calculating  iq)on  a  rise  of  price  at  some  time  or  other, 
which  shall  abundantly  r.epay  both  principal  and  interest. 

Such  are,  T  believe,  the  principal  circumstances  which 
effect  the  distribution  of  the  profits  of  capital,  and  the 
wages  of  labor.  It  may  be  useful  to  illustrate  the  mode 
m  which  they  operate,  in  an  individual  case.  Let  us 
take,  for  instance,  a  yard  of  calico. 

1.   The   price  of  a  bale  of  cotton  is   made  up  of  the 
rent  of  the   land  on  which   it  grew,  the  wages  and   ex- 
pense of  the  laborers  who  were  emplo3^eQ  in  its  culliva 
lion,  the  labor  and  skill  of  the  agriculturist  who  superin 
tends  the  labor,  the  cost  of  seed,  manure,  utensils,  &c. 
He  who  buys  the  cotton,  pays  a  price  sufficient  to  re- 
munerate these   laborers,  pay  the  interest  on  the  invest 
mcnt,  and  replace   the   expenditure   for  materials.      He 
who  raises  the  cotton,  distributee  the  money  which  he 


356  DISTRIBUTION    ILLUSTRATED, 

has  received,  according  to  the  principles  which  have 
been  above  suggested. 

2.  The  cotton  is  sent  by  the  merchant  in  Mobile  to 
New  York,  and  sold  at  an  advanced  price  to  th§  mer- 
chant, in  this  latter  pla:;e.  This  advance,  is  sufficient 
to  remunerate  the  merchant  in  Mobile,  and  to  pay  the 
cost  of  transportation.  The  merchant  at  Mobile  is  thus 
paid  for  his  labor  and  skill  in  selecting  and  stowing  the 
cotton  ;  and  for  the  use  of  his  capital  whilst  it  was  in- 
vested in  cotton.  The  cost  of  transportation  is  made 
up  of  cost  of  investment  in  the  vessel,  in  the  wear  and 
tear  which  it  undergoes,  in  subsistence  of  mariners,  and 
cost  of  insurance.  This  I'eniuneration  is  distributed,  as 
we  have  stated,  according  o  the  skill  and  labor  of  the 
several  persons  by  whom  it  has  been  performed.  This 
is  paid  by  the  merchant  in  New  York,  and  adds  so  much 
to  the  price  of  the  cotton.  When  paid,  it  is  divided 
between  the  owners  of  the  vessel  and  the  mariners,  ac- 
cording to  the  laws  which  govei'n  the  wages  of  labor  and 
of  capital. 

The  cotton  is  bought  by  the  manufacturer,  who  pays 
the  merchant  in  New  York,  what  he  paid  to  the  mer- 
chant in  Mobile,  with  an  addition  for  transportation, 
agency,  and  the  use  of  capital  whilst  it  has  been  in  his 
hands.  He  removes  it  to  his  manufactory,  cards,  spins, 
and  weaves  it,  and  prepares  it  for  the  calico  printer,  to 
whom  it  is  next  sold.  The  calico  printer  pays  the  man- 
ufacturer what  he  paid  the  merchant,  and  an  additional 
sum  for  the  value  which  he  has  conferred  upon  it.  This 
sum  is  the  compensation  to  the  manufacturer.  With  il 
he  remunerates  himself  for  his  use  of  capital,  labor,  and 
skill,  ai  d  pays  his  workmen,  for  their  labor,  according 
10  their  skill  and  industry. 

It  now  goes  through  the  process  of  printing,  and  is 
then  sold  to  the  merchant  at  an  additional  advanc^e. 
This  advance  is  sufficient  to  replace  the  price  paid  by 
the  calico  printer  to  the  manufacturer,  and  also  to  pay 
the  calico  printer  for  the  use  of  his  capital,  and  the  la- 
bor of  his  workmen.  It  is  by  the  merchant  sold  to  the 
consumer.     The  consumer  pays  the  merchant  the  price 


EXTENT    OF    BUSINESS.  357 

paid  by  hini  to  the  manufacturer,  and  an  additional  sunn, 
sufficient  to  remunerate  liini,  for  tlie  use  of  his  capitji), 
skill,  and  labor.  So  that,  wlicii  the  article  conies  to  the 
consumer,  it  is  charged  with  all  these  previous  prices, 
which  have,  in  these  various  processes,  accumulated 
upon  it.  The  consumer  pays  what  has  been  paid  to  the 
agriculturist,  the  mariner,  the  cotton  merchant  in  Mo 
bile,  and  the  cotton  merchant  ii.  New  York,  the  manu 
facturer,  the  calico  printer,  ana  the  calico  merchant. 
Each  several  amount  has  been  charged  upon  it  in  its 
progress,  and  the  consumer,  at  last,  pays  enough  to  re- 
place the  whole.  The  case  is  the  same  with  a  watch,  a 
knife,  a  plough,  or  any  other  article  of  merchandise. 

I  shall  conclude  this  chapter  with  two  general  re- 
marks ;  ajie,  on  the  proper  use  of  creilit ;  the  other,  on 
the  nature  of  insurances. 

From  what  has  been  said  upon  the  nature  of  credit, 
it  is  evident  that  a  merchant  may  easily  carry  on  a  busi- 
ness greatly  beyond  his  actual  capital,  and  even  with  no 
capital  at  all.  For  instance,  he  may  sell  wholly  the 
goods  of  another,  by  purchasing  entirely  on  credit.  Or 
he  may  borrow  capital  of  an  individual,  or  of  a  bank, 
and  pay  cash  for  his  stock,  and  interest  on  his  purchase 
money.  In  this  case,  he  uses  the  property  of  the  lend- 
er, instead  of  the  property  of  the  merchant  of  whom  he 
purchases.  Or  he  may  possess  capital,  say  ten  thou- 
sand dollars,  of  his  own,  and  may  effect  credits  to  twice 
or  thrice  this  amount.  Or,  lastly,  he  may  employ  in 
trade  no  more  capital  than  that  which  he  actually  p  ds- 
sesses. 

Now  it  is  manifest,  that  the  projit  must  be,  in  these 
cases,  very  dissimilar.  When  a  merchant  owns  all  the 
capital  he  employs,  he  receives  as  profit,  interest  on  his 
capital,  and  remuneration  foi  his  labor  and  skill.  When 
he  owns  but  a  part,  he  receives  interest  for  that  part, 
and  remuneration  for  his  labor  and  skill  in  managing  the 
whole.  When  he  owns  nothing,  he  receives  nothing  for 
interest  on  the  capital,  but  only  remuneration  for  his  la- 
bor and  skill  in  the  management  of  the  capital. 

The  risk  of  failure ,  and  the  liability  of  injuring  otb 


358  EXTENT    OF    BUSINESS. 

ers,  are  also  dissimilar.  He  who  owns  all  the  capital 
he  uses,  can  injure  no  one  ;  because  he  cannot  lose 
more  than  all,  and,  as  he  owns  all,  he  is  the  sole  suffer- 
er. His  payments  may  possibly  be  delayed,  but  he 
will,  in  the  eiid,  be  able  to  pay  every  one  his  due. 

When  a  merchant  owns  a  part  of  the  capital  which 
ho  employs,  he  is  not  liable  to  injure  his  creditors,  un- 
less his  loss  be  sufficient  to  absorb  more  than  the  por- 
tion which  he  himself  possesses.  But  when  a  merchant 
trades  wholly  upon  the  capital  of  others,  if  his  losses 
are  more  than  sufficient  to  cover  the  advance  due  to  his 
labor  and  skill,  he  must  fail,  and  his  creditors  must 
suffer. 

Hence,  the  moral  and  economical  principles  which 
should  govern  men  in  the  transaction  of  business,  under 
these  circumstances,  are  somewhat  dissimilar. 

1.  If  a  man  choose  to  squander  or  to  risk  his  own 
property,  though  there  may  be  a  moral  question  in  re- 
spect to  his  duty  to  Cod,  there  is  none  in  respect  to  his 
duty  to  man.  If  he  pay  all  his  debts,  no  one  has  any 
claim  upon  him.  Yet,  so  far  as  his  own  interest  is  con- 
cerned, he  may  do  well  to  remember,  that  men  will  very 
naturally  suppose,  that,  after  having  wasted  all  that  was 
his  own,  it  will  not  be  safe  to  trust  him  with  what  be- 
longs to  others. 

2.  If  a  man  trade  in  part  witli  the  property  of  others, 
he  is  bound  so  to  conduct  his  affairs,  as  to  expose  their 
property  to  no  unnecessary  risk  that  can  be  foreseen. 
Hence,  if  their  guaranty  against  loss,  consist  in  that  part 
of  his  stock  which  he  owns,  he  is  bound  to  guard  against 
every  risk,  which  could  not  be  made  good,  by  the  sacri- 
fice of  his  own  property.  This  principle  affects  both 
th'^  kind  and  the  amount  of  business  which  he  under- 
takes. It  should  be  of  such  a  kind^  as  is  exposed  to 
no  greater  risk  than  may  be  covered  by  his  own  proper- 
ty. It  should  be  only  to  such  an  extent,  that  no  ordina- 
ry fluctuation  of  business  will  endanger  those  who  have 
confided  in  his  skill  and  integrity.  If  he,  knowingly, 
act  otherwise,  he  is  dishonest.  Nor  is  this  all.  If  he 
really  expose  others  to  no  risk,  yet  if  he  so  enlarge  his 


NATURE    AND    USE    OF    INSURANCE.  359 

business,  that  lie  is  contiimally  obligpcl  to  call  npon  his 
tieighbors  for  assistance,  and  (o  ilirow  liiinsell'  on  their 
mercy,  to  save  him  from  loss  of  mercantile  character 
he  iriHes  with  his  credit,  and  makes  an  unfair  use  of  their 
kindness.  A  man  wiio  is  always  exposing  himself  to 
extreme  risks,  will  generally  expose  himself  once  too 
often. 

3.  He  who  trades  wholly  npon  the  capital  of  another, 
should  consider  himself  essentially  in  the  character  ot  an 
agent,  and  at  liberty  to  expose  the  pro|)erty  of  his  prin- 
cipal to  no  risk  ;  or  which  an  unprejudiced  person  would 
not  consider  reasonable.  He  is  to  remember,  that  if  he 
succeed,  the  owner  of  the  property  derives  no  benefit 
beyond  the  fair  and  ordinary  profit  ;  but  if  he  fail,  the 
owner  suliers  all  the  loss,  and,  therefore,  he  has  no  right 
to  seek  to  benefit  himself,  at  the  risk  of  impoverishing 
another. 

4.  The  same  rule  should  govern  the  expenses  of  him 
who  is  engaged  in  business  with  the  capital  of  another. 
He  derives  from  his  trade  nothing  more  than  the  wages 
of  his  skill  and  labor.  Within  the  amount  of  these 
wages,  his  expenses  should  be  restricted.  If  he  expend 
more,  he  is  living  dishonestly  on  the  property  of  another. 
If  he  expend  the  whole  of  these  wages,  he  is  accumu- 
lating no  capital,  but  at  the  end  of  the  year  will  be  as 
poor  as  he  was  at  the  beginning.  He  can  only  become 
rich  by  redncing  his  expenses  as  far  as  possible  below 
his  income,  and  thns  having,  every  year,  something  to 
invest  as  capital,  which  shall  give  stability  to  his  credit, 
and  increase  to  his  annual  revenue. 

Of  Insurance.  When  property  of  any  kind  is  de- 
structible, it  is  liable  to  be  destroyed  by  accident.  Thns 
houses,  being  combustible,  are  liable  to  be  destroyed  by 
fire.  Ships  are  liable  to  be  wrecked  by  storm  and  tem- 
pest Tliis  liability  is  called  risk.  It  is  evident  that  h 
may,  under  given  circumstances,  be  estimated.  Thus, 
if  we  know  the  value  of  all  the  houses  in  a  given  city, 
and  the  amount  of  value  in  houses,  which,  on  an  average, 
for  several  years,  has  been  destroyed  by  fire,  we  may 
estimate    how    great   the    risk    of  fire    in   that    city-    is 


360  NATURE    AND    USE     OF    INSURANCE. 

The   case  is  the  same   with  ships,  or  with   any  othei 
propeity. 

Now  this  risk  being  thus  known,  one  person  may  beai 
it  as  well  as  another.  If  I  have  a  ship  at  sea,  1  may 
eitlier  bear  the  risk  of  losing  it  myself,  or  1  may  pay 
anoiher  person  for  bearing  the  risk  for  nie.  This  trans- 
fer of  risk  is  found  convenient, *and  either  companies  or 
individuals  are  easily  found,  who,  for  a  small  addition  to 
ihe  actual  vahie  of  the  risk,  are  willing  to  insure  any 
property  that  may  be  ofltMed. 

From  this  view  of  the  case,  it  is  manifest,  that  insur- 
ance has  no  eflecf  upon  the  fact  of  the  loss.  If  a  ship 
and  cargo  worth  one  hundred  thousand  dollars  be  sunk, 
precisely  one  hundred  thousand  dollars'  worth  of  value  is 
destroyed.  The  only  elFect  of  insurance  is,  to  make  the 
loss  fall  upon  one  person  instead  of  upon  another.  The 
benefit  of  this  transfer  consists  in  this,  that  the  loss  is 
thus  equalized.  It  is  better  for  a  community  to  divide  a 
given  loss  among  a  great  number  of  persons,  than  to  suf- 
fer it  to  fall  exclusively  upon  one. 

And  hence,  inasmuch  as  every  one  has  the  power  of 
avoiding  risk,  by  paying  a  small  premium  ;  every  one 
whose  property  is  small,  and  liable  to  be  lost  by  a  single 
accident,  is  negligent  if  he  suffer  it  to  remain  a  moment 
uninsured.  Specially  is  this  the  case,  when  he  holds 
the  property  of  others  ;  or  when  their  only  security  for 
payment  depends  upon  the  stock  in  trade  which  he  pos- 
sesses. 

And  again.  As  insurance  has  no  effect  ii|)on  the  fact 
of  loss,  the  higjier  the  premium  of  insurance  the  greater 
is  the  annual  loss  to  a  country  ;  because  it  shows  us  how 
great  an  amount  of  property  is  annually  destroyed. 
Hence  a  sound  policy  would  always  dictate  the  in  por 
tance  of  taking  every  means  to  reduce  the  rate  of  insur- 
ance as  low  as  possible.  'JMiis  can  be  done  only  by  re- 
ducing tlie  risk  of  tlie  accidental  destrnclion'of  [)roperty. 
On  this  account,  the  abundant  supply  of  water  is  a  mat- 
ter of  inestimable  economical  im|>ortance  to  a  city.  The 
difference  in  the  amount  annually  paid  for  insurance  by 
the  two  ciiios   of  Now  York   and    I'liilndclphia  is  enor- 


NATURE    AND    USE    OF    INSURANCE.  361 

moiis  Nor  is  this  all.  New  York,  in  one  single  night, 
has  lost,  Ijy  fire,  property  sufluient  to  pay  the  exj)eiise 
of  abundantly  supplying  herself  with  water  three  times 
over.  TJie  ?t  i  ju  principles  would  teach  us  the  impor- 
tance of  accur.ate  surveys  of  the  coast,  the  erection  of 
light  houses,  and  of  wise  and  judicious  laws  lor  the  gov- 
ernment of  pilots. 


BOOK  FOURTH. 


OF  CONSUMPTION. 


CHAPTER   FIRST. 

OF    THE    NATURE    AND    DESIGN    OF    CONSUMPTION. 

Of  the  nature  of  Consumption.  ConsuiDplion  is  the 
destruction  of  value.  By  liiis  is  not  meant  the  annihi- 
lation of  the  material^  but  only  of  a  jiarticular  form  of 
utility.  Thus,  if  gunpowder  be  burned,  i[  bread  be 
eaten,  if  a  tree  be  felled,  the  particular  utility  which 
each  originally  possessed,  is  destroyed  forever.  And 
this  destruction  of  value  takes  place,  altogether  in- 
dependently of  the  result  which  may  in  diflerent  cases 
ensue  ;  because  that  destruction  is  as  truly  efl'ected  in 
one  case  as  in  another.  A  load  of  wood,  when  it  has 
been  burned,  as  truly  loses  its  utility,  that  is,  its  powei 
of  creating  heat,  when  it  is  destroyed  in  a  conflagration, 
as  when  it  is  consumed  under  a  steam  boiler,  or  in  a  fire 
pla^,  though  the  result  in  the  two  case;,  may  be  very 
dissnnilar.  H'  bread  be  thrown  into  the  sea,  its  utility  is 
destroyed,  just  as  much  as  if  it  were  eaten  ;  though,  in 
the  one  case,  there  is  no  result  from  the  consumption, 
and,  in  the  other,  it  is  the  u.eans  of  creating  the  vigor 
necessary  to  labor. 

Hence  consumption,  viewed  simply  by  itself,  may  be 


NATURE     OF    4CNSUMPTI0N.  363 

considered  in  the  nature  of  a  misfortune.  It  is  the  de* 
structiott^f  so  much  wealth  as  is  consumed.  A  man, 
if  lie  haci  his  choice,  would  rather  create  one  product 
without  destroying  another  ;  or  enjoy  a  gratification,  if 
it  were  possible,  without  rendering  the  thnig  enjoyed  use- 
less. But,  inasmuch  as  it  is  the  law  of  our  Creator  that 
we  ^hall  obtain  our  possessions,  and  gratify  our  desires, 
on  no  other  conditions  than  that  of  the  destruction  of 
value,  W8  hav^e  no  choice.  We  cannot  cut  up  a  hide  of 
leather  for  the  pur})ose  of  making  siioes,  without  destroy- 
ing forever  its  utility  as  a  hide  of  leather.  We  cannot 
cut  down  a  tree,  and  saw  it  into  boards,  without  destroy- 
ing forever  its  utility  as  a  tree.  We  cannot  enjoy  the 
pleasure  of  eating  an  orange,  without  destroying  for- 
ever the  power  in  that  orange  of  aflbrding  to  any  one 
else  the  same  pleasure.  And  thus,  m  general,  con- 
sumption is  one  part  of  an  exchange,  in  which  we  sur- 
render one  value  with  the  hope  of  obtaining  another ; 
and  whether  the  hope  be  realized  or  not,  the  value  con- 
sumed is  surrendered,  and  surrendered  forever. 

When,  however,  it  is  said,  that  the  utility  consumed 
is  destroyed  forever,  we  mean  only  to  speak  of  this 
particular  utility.  There  may  yet  remain  some  valuable 
quality  which  has  not  yet  been  afl'ected.  Thus,  if  a 
linen  garment  be  worn  out,  its  utility  as  a  linen  garmmit 
is  destroyed  forever.  It  may,  however,  still  possess  an 
imj)ortant  utility,  as  a  material  for  the  manufacture  of 
lint  or  of  paper.  Wood  may  be  consumed  for  fuel 
and  its  utility  as  fuel  may  be  destroyed  forever.  A 
quantity  of  ashes  however  remains,  which  possesses  an 
utility  for  the  manufacture  of  soap.  A  pair  of  India 
rubber  shoes  may  be  worn  out,  and  yet  possess  a  valu- 
able utility  to  the  manufacturer  of  India  rubber  cloth 
Hence  we  see  the  inijiortance,  in  all  cases,  of  entirely 
exhausting  all  the  values  contained  in  any  product  before 
we  siH'render  it  up  as  worthless.  For  the  want  of  this 
care,  millions  of  property  are  aimually  wasted.  The 
difference  between  the  cost  of  two  establishments,  in  the 
one  of  which  every  utility  of  every  substance  is  consum- 
ed, and  i-i  the  other  of  which,  only  the  first  utility  is  cor- 


364  KINDS    OF    C#NSUMPTION. 

sumed,  is  frequently  as  great  as  the  nett  profits  realized 
m  the  ordinary  employments  of  industry. 

1.  Consumption  may  be  either  of  labor  or  07  capital. 
A  mechanic  who  bestows  a  day's  labor  upon  a  table, 
consumes  that  amount  of  labor  upon  it.  He  also  con- 
sumes the  material  upon  which  he  has  labored.  He  has 
receiv^ed  in  return  the  table,  and,  if  his  labor  and  capital 
have  been  well  employed,  the  result  will  recompense 
his  consumption,  both  of  labor  and  capital.  So  he 
who  employs  laborers  to  work  for  him,  consumes  all 
the  labor  which  he  purchases.  Hence  we  see  that 
every  day  spent,  is,  in  fact,  so  much  value  consumed. 
If  it  bring  no  profitable  result,  it  is  so  much  value  wasted. 

2.  Consumption  may  be  either  voluntary  or  involun- 
tary. It  is  voluntary  when  it  is  effected  by  design.  It 
is  involuntary  when  it  is  the  result  of  accident.  In  either 
case,  if  there  be  consumption,  there  is  value  destroyed. 
The  difference  is,  that,  in  the  one  case,  there  is  a  profit- 
able result  expected  ;  in  the  other  case  there  is  none. 
If  a  loaf  of  bread  become  mouldy  by  neglect,  its  value 
is  destroyed,  just  as  much  as  though  it  were  eaten.  The 
difference  is,  that,  in  the  one  case,  the  loss  is  total  ;  in 
the  other  case,  the  consumption  of  value  creates  a  power 
to  labor,  which  is  .of  more  value  than  the  loaf  itself.  If, 
for  the  want  of  a  fender,  the  fire  fall  out  of  the  fire  place, 
and  burn  the  carpet,  the  carpet  is  as  effectually  consum- 
ed as  if  it  were  worn  out  by  use.  The  difierence  is, 
that,  in  the  one  case,  it  alTords  a  substantial  convenience, 
and  in  the  other  it  affords  none.  If,  by  forgetfulness  or 
neglect,  a  gate  is  left  unlatched,  and  it  is  beaten  ^ 
pieces  by  the  wind,  it  is  as  effectually  consumed,  as  by 
the  wear  of  several  years.  The  difference  is,  that,  in 
the  one  case,  it  answers  for  a  long  time  the  purpose  of 
inclosure,  in  the  other  case  it  answers  no  purpose  at  all. 
Hence,  the  necessity  of  care  and  vigilance  in  all  the 
business  of  hfe.  Almost  every  thing  is  constantly  tend- 
ing to  Consumption.  Vegetable  matter  decays.  Animal 
matter  putrefies.  Most  of  the  metals  may  be  corroded. 
Almost  all  our  possessions  are  liable  to  accidental  (K- 
struotion,  from  fire,  or  flood ;  from  the  frosts  of  winter 


KINDS    OF    CONSUMPTION.  365 

or  the  heat  of  summer.  Hence,  without  our  continual 
care,  a  continual  process  of  consumption  will  be  going 
on,  by  which  our  capital  will  be  diminished. 

3.  Consumption  is  either  rapid  or  gradual.  The 
consumption  of  wood  for  fuel  is  rapid.  The  consump- 
tion of  wood,  in  consequence  of  the  wear  of  a  dwelling 
house,  is  gradual.  But  gradual  consumj)tion  is  as  sure 
and  as  certain  as  though  it  were  rapid.  Hence,  in  esti- 
mating cost  and  expenses,  unless  an  allowance  be  made 
for  Wear  and  tear,  our  calculations  will  not  agree  with 
the  fact.  If  a  man's  furniture  be  wearing  out  every 
year,  this  average  of  loss,  is  as  much  to  be  taken  into 
account,  in  estimating  his  expenses,  as  the  cost  of  the 
fuel  which  he  consumes. 

The  annual  consumption  of  an  individual,  is  the  sum 
total  of  all  the  values  which  he  destroys.  Hence  the 
materials  upon  which  he  operates,  the  tools  which  he 
wears  out,  the  expenses  of  his  household,  both  for  ma- 
terials and  for  labor,  are  all  to  be  reckoned  as  parts  of 
his  annual  consumption.  So,  also,  the  values  destroyed 
by  a  nation,  are  the  national  consumption.  The  exports 
of  an  individual  or  of  a  nation,  are  a  part  of  individual 
or  of  national  consumption,  since  value  to  the  full  amount 
of  tlie  exports,  is  abstracted  hom  the  capital  of  the 
country.  On  the  contrary,  the  imports  are  the  product, 
or  what  the  country  receives  back  again  in  return  for  its 
exports  or  consumption. 

Kvery  man  in  the  country  is  a  consumer.  Without 
consuming,  he  could  not  sustain  life  a  day.  He  nnist 
consume  the  food  which  he  eats,  the  clothes  which  he 
wears,  and  the  dwelling  that  shelters  him.  Hence,  if  he 
do  not  produce  any  thing,  he  is  an  absolute  and  useless 
burden  upon  the  community.  If  he  do  ^ot  produce  as 
much  as  he  consumes,  he  is  by  the  whole  amount  of  that 
deficiency  an  unprofitable  member  of  the  body  politic. 

A  man  cannot,  honestly,  consume  more  than  he  pro- 
duces. And  the  more  he  produces,  the  more  may  he 
consume.  Hence,  the  more  industrious  and  the  richer 
the  community,  the  greater  will  be  the  consumption,  and 
of  course  the  demand.  Hence,  as  we  have  said  before, 
31* 


366  DESIGN    OF    CONSUMPTION. 

ihe  richer  the  community.,  the  better  will  it  be  for  everj 
class  of  producers. 

11.  Of  the  design  of  Consumption.  Consumption, 
as  we  have  said,  is  the  destruction  of  value.  But  no 
man  in  his  senses,  will  consume  value  without  some  ex- 
pectation of  advantage.  Hence,  the  design  of  con- 
sumption is  always  some  advantage  which  cannot  be  ob- 
tained in  any  other  way. 

Tliis  advantage  is  of  two  kinds.  1.  The  increase  oj 
value  :  or,  2.    7Vie  gratification  of  desire. 

1.  The  increase  of  value.  This  is  the  design  of  con- 
sumption in  all  the  departments  of  industry.  Thus,  the 
fai'mer  consumes  seed,  utensils,  rent,  manure,  labor,  and 
food  for  the  sustentation  of  laborers.  These  all  are  ab- 
stracted from  his  capital,  and  their  value  is  destroyed, 
either  wholly  or  in  part,  forever.  But  he  consumes 
them  cheerfully^  in  the  expectation  that  the  crop  which 
he  reaps  will  replace  them,  and  repay  both  the  interest 
of  his  capital,  and  his  various  outlays  for  materials  and 
labor,  and  leave  him  also  a  suitable  recompense  for  his 
industry  and  skill. 

The  manufacturer,  consumes  raw  cotton,  instruments, 
machinery,  and  labor.  The  value  of  these  various  pro- 
ducts, is  destroyed  forever.  But,  by  means  of  this 
destruction,  he  produces  a  fabric  which  repays  all  his 
consumption,  and  yields  him  a  reasonable  profit. 

The  merchant  collects  the  productions  of  his  own 
country,  and  sends  thehi  abroad  in  his  ship.  lie  thus 
consumes  these  products,  and  also  the  wear  and  tear  of 
his  ship,  and  the  labor,  skill,  and  subsistence  of  his  ofli- 
cers  and  crew.  His  return  cargo,  if  the  voyage  have 
been  successful,  replaces  his  cargo  exported,  pays  the 
expense  of  tr^sportation,  and  afibrds  him  a  compensa- 
tion for  his  labor  and  skill. 

And  thus,  in  all  the  operations  of  industry,  the  pro- 
cess of  consumption,  or  the  destruction  of  particular 
values  for  the  sake  of  producing  other  and  greater  val- 
ues, is  continually  going  on.  And  men  consume  values 
in  this  manner  cheerfully,  because  they  are  aware  thai 
increaie  of  value  is  to  be  effected  in  no  other  way. 


DESIGN    OF    CONSUMPTION.  3G7 

2.  The  gratijication  of  desire.  In  this  ca.ie,  the 
vaUie  of  a  product  is  commonly  destroyed,  without  the 
aiuicipaiion  of  the  creation  of  any  other  product  by 
vvhicii  it  is  to  be  replaced.  Tlie  purposes  for  which 
values  are  consumed  in  this  manner  are  various. 

1.  For  the  gratification  of  tiiose  desires  which  are 
necessary  to  the  preservation  of  life  and  health.  In  this 
manner,  we  consume  food,  clothing,  and  shelter.  In 
this  case,  there  is  combined  with  the  gratification  of  de- 
sire, a  substantial  benefit,  in  the  health  and  vigor  which 
we  derive  from  suitable  nourishment. 

2.  The  gratifications  of  the  senses  and  the  tastes. 
We  consume  valyes  in  the  gratifications  of  sense,  when 
we  expend  money  for  shows,  for  mere  delicacies  of  the 
table,  for  luxuries  of  dress,  and  for  any  thing  of  which 
the  only  result  is,  the  gratification  of  a  physical  appetite. 
In  this  case,  our  only  recompense  consists  in  the  pleas- 
ure experienced  in  the  organ  of  sense.  The  pleasures 
of  taste,  are  enjoyed  in  painting,  statuary,  architecture, 
music,  &c.  In  this  case,  besides  the  gratification  of  the 
taste,  there  is  also  an  additional  result,  in  the  mental  cul 
tivation  and    refinement,  which  such  pleasures  promote. 

.3.  Intellectual  gratifications.  We  consume  money, 
for  this  purpose,  in  the  purchase  of  books  and  philo- 
sophical instruments,  and  we  consiune  time  in  the  study 
and  use  of  them.  We  here  enjoy  the  pleasure  of  intel- 
lectual exercise,  and  also  obtain  that  knowledge,  by 
which  we  are  enabled  to  perform  the  duties  of  life  with 
greater  success. 

4.  Social  pleasures.  We  gratify  our  social  instin<  ts, 
by  hospitality  to  our  friends  ;  and  thus  strengthen  the 
ties  which  bind  us  to  the  human  race. 

5.  JMoral  pleasures.  In  benevolence,  for  instance,  we 
expend  money  for  the  good  of  others.  In  this  case,  we 
receive  gratification  in  the  act  itself,  and  also  cultivate  in 
ourselves  those  dispositions,  which  make  us  more  wor- 
thy of  the  regard  of  our  fellows,  and  more  well-pleasing 
to  our  Father  who  is  in  heaven. 

We  have  said  that,  by  consumption,  value  is  de- 
Btroyed  ;  but  it  is  destroyed  w  ith  the  expectation  of  real- 


S6S  DESIGN    OF    CONSUMPTION. 

izing  a  more  valuable  result.  Hence,  we  see  that  ths 
character  of  this  consumption,  is  to  be  decided  by  ascer- 
taining how  far  this  expectation  has  been  realized.  If  a 
product  of  more  value  than  the  time  and  labor  con- 
sumed, be  created  by  the  consumption,  such  consump- 
tion is  called  productire.  Such  is  the  case  when  a 
farmer  consuines  labor  and  ca])ital,  worth  one  hundred 
dollars,  and  realizes  a  harvest  worth  two  hundred  dol- 
lars. If  the  product  be  not  equal  to  the  consumption, 
such  consumption  is  called  unproductive.  If  no  product 
at  all  be  realized,  the  consumption  is  then  a  total  loss. 

And,  the  same  principles  apply  when  consumption  is 
effected  for  the  purpose  of  gratifying,  a  desire.  If  no 
such  result  be  realized,  it  is  a  total  loss.  If  the  gratifi- 
cation be  of  less  worth  than  the  value  consumed  ;  or  if 
we  have  obtained  a  less  amount,  or  less  excellent  grati- 
fication, than  we  could  have  procured  by  some  other 
mode  of  expenditure,  there  is  always  a  loss,  although  it 
may  not  be  total,  and  the  consumption  is  unwise. 

From  what  has  been  said,  we  may  easily  see  the  rules 
by  which  expenditure  of  all  kinds  should   be  governed. 

1.  Inasmuch  as  consumption  is  a  destruction  of  value, 
and  annihilates  forever  the  particular  value  which  we 
consume,  our  consumption,  for  the  purpose  of  producing 
a  given  result^  should  be  as  small  as  possible.  What- 
ever is  consumed  beyond  what  is  necessary  to  accom- 
plish our  purpose,  is  so  much  absolute  loss. 

2.  The  consumption  being  given,  it  should  be  our  ob- 
ject to  derive  from  it  as  large  a  product  or  as  valuable  a 
gratification  as  possible.  Whatever  is  consu  ned,  that 
does  not  conduce  to  this  result,  in  every  way  of  which 
it  is  capable,  is  so  much  utility  thrown  away. 

When  these  rules  are  perfectly  obeyed,  we  enjoy  as 
much  as  our  circumstances  allow  ;  and  we  also  enjoy  it, 
with  as  little  ex])ense  to  the  means  of  happiness  of  oth- 
ers as  the  nature  of  the  present  constitution  permits. 

Consumption  is  of  two  kinds.  Individual  and  Public. 
Individual  consumption,  is  what  the  individual  consumes 
for  his  own  personal  profit  or  gratification.  Public  con- 
sumption, is  what  is  consumed  by  the  society,  for  the 
benefit  of  the  whole 


CHAPTER  SECOND 

OF    INDIVIDUAL    CONSUMPTION. 

The  consumption  of  each  individual,  is  tlie  amount 
cf  value  .wliich  he  destroys,  either  for  his  own  personal 
proft^  or  for  [he  gratificalion  of  his  desires. 

Individual  consumption  is,  then,  of  two  kinds  ;  first, 
what  he  consumes  for  the  sake  of  reproduc-lion,  and 
secondly,  what  he  consumes  for  the  gratification  of  de- 
sire ;  or,  in  other  words,  what  he  consumes  in  personal 
and  domestic  expenditures.  We  shall  consider  these 
subjects  se])arately. 


SECTION  I. 

OF     INDIVIDUAL      CONSUMPTION     FOR     THE      SAKE     OF 
REPRODUCTION. 

This  is  the  consumption,  which  every  individual  ef- 
fects, who  carries  on  the  operations  of  j)roduction.  The 
farmer,  the  mechanic,  the  nxanufacturer,  the  merchant 
are  all  consumers,  and  are  such  in  a  greater  or  less  de- 
gree, according  to  the  extent  of  their  production. 

Productive  consumption  requires  both  skill  and  labor, 
while  consumption  Ibr  the  sake  of  gratification  requires 
neither.  It  requires  labor  and  skill,  so  to  consume  seed 
and  manure,  &c.,  as  to  produce  a  loaf  of  bread,  but  il 
requires  neither  skill  nor  labor,  to  eat  it  after  it  has  been 
produced.  It  requires  labor  and  skill  so  to  consume 
wool  and  dye  stuff's  as  to  produce  cloth  ;  and  so  to  con- 
sume that  cloth  as  to  produce  a  suit  of  clothes,  but  it  re- 
quires no  skill  or  labor  to  wear  them  after  they  have 
been  produced. 


370  CONSUMPTION    OF    CAPITAL. 

On  the  other  hand,  productive  consumption,  is  com 
monly  attended  with  no  immediate  gratification.  The 
fanner  may  prefer  agriculture  to  manufactures,  but  he 
would  not  commonly  labor  for  the  mere  pleasure  of  the 
operation.  Could  he  secure  his  crop  with  half  the  pres- 
ent labor,  or  with  no  labor  at  all,  he  would  doubtless 
do  so.  The  case  is  the  same  with  the  manufacturer,  or 
any  other  producer. 

We  can  rarely  use  the  same  value  for  these  two  dis- 
tinct and  opposite  purposes.  If  a  man  consume  one 
hundred  dollars  in  amusement,  or  in  ostentation,  he  can- 
not have  it  also  as  capital,  to  be  employed  in  his  trade. 
And,  not  only  can  he  not  have  it  noio,  but  he  can  never 
have  it  again.  If  it  be  invested  in  reproduction  this 
year,  it  may,  by  the  next  year,  amount  to  one  hundred 
aid  fifty  dollars,  and  the  year  after,  to  two  hundred  dol- 
lars, and  in  twenty  years  it  may  become  five  thousand 
dollars.  If  it  be  spent  on  an  entertainment,  or  a  jour- 
ney of  pleasure,  it  is  lost,  and  all  that  it  might  have  sub- 
sequently become,  is  lost  forever.  This  should  be 
borne  in  mind  by  every  man  who  wishes  to  rise  to  inde- 
pendence. Every  dollar  which  is  spent  in  self-gratifica- 
tion, IS  so  much  capital  placed  forever  out  of  his  power. 
And,  on  the  contrary,  every  dollar  which  he  invests  in 
reproductive  employment,  may  at  any  future  time  minis- 
ter to  gratification,  or  it  may  provide  the  means  of  much 
more  valuable  gratification  in  subsequent  life. 

Consumption  is  either  of  capital,  or  of  labor. 

I.    Consumption  of  Capital. 

The  principles  which  we  have  already  endeavored  to 
illustrate,  would  suggest  the  following  rules,  respecting 
this  part  of  consumption  ;  • 

I.  Oin-  consumption  of  capital,  in  order  to  produce  a 
given  result,  should  be  as  siuall  us  possible.  The  ordi- 
nary maxim  is  as  true  as  it  is  connnon,  a  pchny  saved  is 
a  penny  earned.  In  estimating  the  profits  of  any  oper 
alion,  it  is  manifest,  that  he  who  has  produced  a  value 
worth  one  hundred  dollars,  at  an  expense  of  sixty  dol- 
lars, reaps  a  profit  of  twenty  dollars  more  than  he  who 
has   produ'"ef(    the   same  value   at  an  cxj)ense  of  eighty 


CONSUMPTION    OF    CAPITAL.  37  J 

dollars.  Thus,  tlie  farmer  should  economize  to  t+ie  ut- 
most all  his  materials.  He  v\  lio  saves  half  a  bushel  of 
seed,  in  sowing  an  acre,  eniiches  himself  as  much  as 
though  he  had  reaped  hall  a  hushel  more  per  acre,  ll 
is  said  that  in  China,  sowing  is  always  done  by  drilling. 
One  of  Lord  Macartney's  suite  estimated  that  the  saving, 
Lhroughout  the  whole  empire,  from  this  ia)provemenl,  is 
sufficient  to  feed  the  whole  population  of  Great  Britain. 
The  same  principle  applies  to  mechanics,  manufacturers, 
and  all  consumers  whatever.  It  is,  unfortunately,  the 
case,  that,  from  want  of  care  and  ingenuity,  a  much  larger 
portion  of  value  is  commonly  consumed,  than  is  neces- 
sary for  the  production  required.  This  is  specially  the 
case  with  fuel.  Probably  not  more  than  one  tenth  of 
the  heat  given  off  by  wood,  is  rendered  serviceable  by 
the  common  fire  place. 

2.  We  should  employ  capital,  of  no  greater  value 
than  is  necessary  to  eli'ect  the  production  intended. 
Hence,  every  producer  should  make  it  an  object  of  in- 
quiry, to  ascertain,  so  far  as  the  present  state  of  knowl- 
edge may  enable  him,  in  what  manner  he  may  efieci  his 
purposes,  by  the  least  costly  materials.  The  merchant, 
on  this  principle,  should,  before  making  an  exchange, 
ascertain  what  is  the  cheapest  product  at  honje,  with 
which  he  will  be  able  to  procure  a  given  amoimt  of  a 
product  fiom  abioad.  Very  much  of  the  success  of  a 
producer,  must,  of  course,  depend  upon  his  skill  in  this 
respect.  The  discovery  of  a  cheaper  dye  stuff,  of  equal 
goodness,  or  the  exchange  of  one  export  for  another, 
may  frequently,  of  itself,  be  sufficient  to  render  a  man 
independent.  I  do  not,  of  course,  suppose  that  any 
man  will  be  so  simple  as  knowingly  to  expend  more  in 
production  than  he  supposes  necessary.  To  guaid  hmn 
against  this  folly  is  not  my  object.  It  is  rather  to  incite 
every  man  to  a  more  thorough  and  intimate  knowledge 
of  the  principles,  on  which  the  operation  which  he  con- 
ducts, depends.  It  is  only  by  such  knowledge,  that 
improvements  in  the  various  departments  of  industry  are 
lo  be  etfected.  And  hence  we  see  the  importance  of 
knowledge,  to  every  man  in  the  community. 


372  CONSUMPTION    OF    CAPITAL. 

3.  'It  is  important  tliat  every  utility  possessed  by  any 
substance,  be  entirely  consumea. 

In  order  to  secure  tills  result,  attention  must  be  paid 
to  two  circumstances.  First.  Alltiie  fragments  and 
remnants  should  be,  so  far  as  possible,  employed  to 
some  valuable  purpose.  This  principle  is  well  illus- 
trated in  the  vaiious  uses  to  which  the  horns  of  cattle 
are  applied.  The  horn  consists  of  two  parts,  an  out- 
ward horny  case,  and  an  inward  conical  shaped  sub- 
stance. The  first  process  consists  in  separating  these 
two  parts,  by  means  of  a  blow  against  a  block  of  wood. 
The  horny  exterior  is  then  cut  into  three  portions,  by 
means  of  a  frame  saw. 

1.  The  lowi-st  of  them,  next  to  the  root  of  the  horn, 
after  undergoing  several  processes  by  which  it  is  ren- 
dered flat,  is  made  into  combs. 

2.  The  middle  of  the  horn,  after  being  flattened  by 
heat,  and  its  transparency  improved  by  oil,  is  split  into 
thin  layers,  and  forms  a  substitute  for  glass,  in  lanterns. 

3.  The  tip  of  tlie  horn,  is  used  by  the  makers  of 
knife  handles,  and  of  the  tops  of  whips. 

4.  The  interior  or  core  of  the  horn,  is  boiled  down 
in  water.  A  large  quantity  of  fat  rises  to  the  surface 
This  is  sold  to  the  makers  of  yellow  soap. 

5.  The  liquid  itself,  is  used  as  a  kind  of  glue,  and  is 
purchased  by  the  cloth  dressers  for  stiffening. 

6.  The  bony  substance  which  remains  behind,  is  sent 
to  the  mill,  and,  being  ground  down,  is  sold  to  the  far- 
mers for  manure. 

7.  The  clippings  and  shavings,  are  also  sold  to  the 
farmers  for  manure,  or  are  used,  in  small  quantities,  for 
the  manufacture  of  toys.* 

Now,  it  is  evident,  that  if  any  part  of  this  material 
were  wasted,  the  cost  of  the  manufactured  articles  would 
be  higher,  and  the  gain  of  the  producer  less.  And,  we 
also  see  that  he  who  first  discovered  the  mode  of  ren- 
dering any  one  of  these  portions  of  a  horn  useful,  must, 
bj  this  single  discovery,  have  made  himself  rich. 

•  Babbage  on  Manufactures. 


ECONOMY     OK    LABOR.  373 

And,  Se.condly.  Jill  the  values  mtist  he  consumed  in 
ike  most  profildhle  manner.  It  frequently  happens,  tliat 
a  prnducer  wants  but  one  value  from  a  substance  for  Ids 
particular  purpose,  wliih  another  and  an  important  value 
remains  unappropriated.  It  is  always  a  matter  of  im- 
portance to  employ,  in  the  best  manner,  every  value 
which  a  substance  is  known  to  j)ossess.  Thus,  after  we 
have  derived  from  wood,  all  the  heat  which  it  can  evohe, 
it  leaves  ashes,  which  possess  an  important  value.  Afior 
the  oil  has  been  expressed  from  flax  seed,  the  residuum 
is  valuable  food  for  cattle.  The  employment  of  this 
utility,  of  course,  lessens  the  price  of  oil,  and  increases 
the  demand  for  it.  Hence,  we  see  the  supeiiority  of 
the  economy  of  large  establishments  to  that  of  smaller 
ones.  A  large  manufacturing  establishment,  can  carry 
on  several  distinct  operations,  for  the  sake  of  using  these 
secondary  utilities.  In  a  small  one,  this  would  be  im- 
possible, and  much  must  in  consequence  be  wasted 
Thus,  in  connexion  with  a  large  slaughter-house,  I  have 
seen  a  soap  and  cfftidle  manuAictory,  a  manufactoiy  of 
glue,  and  one  of  neat's  foot  oil  ;  while  a  large  number  of 
hogs  was  fattened  with  the  refuse  of  these  several  estab- 
lishments. In  this  manner,  every  part  of  the  slaugh- 
tered animal  was  profitably  consumed.  In  small  estab- 
lishments, a  large  portion  of  these  fragments  would  be 
wasted. 

IT.    Consumption  of  labor. 

The  |)rinciples  above  illustrated  would  teach  us  :  — 

1.  To  employ  precisely  as  much  labor  as  is  necessary 
to  accomplish  the  intended  result. 

We  should  never  employ  more  than  is  wanted.  This 
generates  idleness  and  negligence.  One  supernumerary 
laborer,  is  not  only  useless  himself,  but  he  generally  re« 
quires  the  time  of  two  or  three  others,  to  bear  him  com- 
pany in  idleness. 

We  should  never  employ  less  labor  than  is  wanted. 
This  produces  confusion,  and  destroys  the  advantages 
of  correct  division  of  labor.  It  saves  nothing  to  em- 
ploy one  person  less  than  is  necessary  in  an  establish- 
ment, and  to  suspend  the  labor  of  others  several  tmes 
32 


374  ECONOMY     OF    LABOR. 

in  a  day,  in  order  to  do  the  work  which  that  one  should 
have  accomphshed. 

In  general,  provided,  of  course,  the  work  be  weli 
done,  the  less  the  consumption  of  labor  the  better  for 
the  producer.  Hence,  the  economy  of  labor-savms:  ma- 
chinery. He  who,  by  an  ingenious  contrivance,  is  able 
to  save  the  hire  of  one  laborer,  will  find  himself,  at  the 
end  of  the  year,  richer  by  precisely  this  amount  saved. 

2.  We  should  employ  labor  at  no  higher  price ^  than 
is  necessary  to  accomplish  our  object. 

Every  important  operation  consists  of  several  subor- 
dinate operations,  requiring  very  different  degrees  of 
skill  in  their  execution.  According  to  these  degrees  of 
skill,  the  wages  of  labor  are  adjusted.  Now,  economy 
demands,  that  labor  of  no  higher  price  should  Dc  em- 
ployed on  each  several  operation,  than  the  iniportance 
of  the  operation  requires.  He  who  is  able  so  to  arrange 
his  laborors,  as  to  execute,  by  labor  worth  fifty  cents, 
what  was  formerly  executed  by  labor  worth  one  dollar, 
makes  a  gain^of  fifty  cents  a  day.  X'^^^'s^  in  the  power- 
press,  the  labor  of  press-work,  which  formerly  employed 
two  able-bodied  men,  is  executed,  in  part,  by  animal 
force,  or  by  steam  power  ;  and  the  remainder  by  women. 
The  reduction  in  price,  thus  efibcted,  is  very  consider- 
able. 

But  while  this  is  the  fact,  it  is  also  the  fact,  that  it  is 
never  pi'ofilable  to  employ  laborers  incapable  of  accom- 
plishing the  result.  \(  a  particular  part  of  an  oj)eration 
require  skill  and  labor  worth  five  dollars  per  day,  it  is 
better  to  give  this  price  than  to  confide  it  to  an  incom- 
petent person,  who  is  willing  to  work  for  two  dollars  per 
day.  Thus,  a  good  painter  of  calico  patterns,  a  good 
calico  engraver,  or  dyer,  may  be  cheajier  at  five  dollars 
per  day,  tiian  an  inferior  artist,  even  if  the  iatter  would 
perform  the  labor  for  nothing. 

We  hence  see,  again,  the  importance  of  an  accurate 
knowledge  of  principles,  to  every  one  engaged  in  exten- 
sive production.  It  is  by  deep  and  thorough  reflection 
upon  every  part  o\  the  process  which  he  conducts,  that 
a  manufacturer  is  able  to  keep  up  with,  and  tpeciully  to 


ECONOMY     OF    LABOR.  375 

add  to,  ihe  improvements  of  the  age,  and  .o  prevent 
himseir  from  being  undoisold  by  his  more  enterprising 
and  intelligent  neiglibtjrs. 

3.    The  labo>  paid  for ^  should  all  be  performed. 

Time,  as  it  is  frequently  said,  is  money.  It  is  surely 
money  to  him  who  pays  money  for  it.  And,  of  course, 
every  hour  for  which  he  pays,  that  is  spent  in  idleness 
or  uselessness,  is  so  much  useless  consumption  ;  or  so 
nnich  absolute  loss. 

The  causes  of  the  waste  of  labor  are  various.  Some 
of  the  more  conniion  are  :  — 

1.  Want  of  superintendence.  It  cannot  be  supposed 
that  laborers,  if  left  alone,  and  if  paid  by  the  day,  will 
labor  as  faithfully  as  if  laboring  for  themselves.  Hence, 
the  necessity  and  the  economy  of  efficient  superinten- 
dence. He  who  employs  twenty  men  by  the  day,  to 
perform  a  particular  piece  of  work,  will  find  that  an  ef- 
ficient superintendent  will,  by  j)reventing  idleness,  saun- 
tering, and  story-telling,  save  nuich  more  than  his  wages. 
And,  hence,  1  suj)pose  that  commonly,  where  the  labor 
is  of  such  a  nature  as  to  allow  of  it,  it  is  cheaper  to  pay 
by  the  piece,  than  the  day.  In  the  one  case,  if  a  la- 
borer be  idle,  he  wastes  his  oxen  time  ;  in  the  other  case, 
the  time  of  his  enii)loyer.  It  is  easy  to  perceive  which 
case  is  the  more  favorable  to  industry 

2.  Irregularity.  This  is  a  great  source  of  waste  of 
labor.  Where  tools  are  allowed  to  get  out  of  place, 
materials  to  be  deficient  or  unsuitable  ;  or  where  several 
laborers  are  obliged  to  stand  idle,  to  wait  for  the  com- 
pletion of  an  ojjcration  which  is  done  out  of  season, 
much  time  must,  of  necessity,  be  lost.  In  a  shop  con- 
taining a  dozen  workmen,  if  each  one  spend,  on  an  av- 
erage, half  an  hour  a  day  in  looking  for  misplaced  tools, 
or  in  waiting  for  materials  not  at  hand,  this  is  a  loss  of 
more  than  half  the  wages  of  one  laborer  a  day.  This, 
in  a  year,  would  be  sufficient  to  purchase  the  clothes  of 
a  small  family. 

3.  Defective  tools.  In  order  that  the  economy  of  la- 
bor may  be  as  great  as  possible,  the  tools  by  which  labor 
is  saved,  should  be  as  perfect  as  possible  ;  otherwise, 


376  ECONOMY     OF    LABOR. 

we  derive  only  a  partial  benefit  from  the  invention,  Hft 
who  employs  a  man  to  chop  wood,  would  certainly  see 
the  importance  of  furnishing  him  with  a  sharp  axe.  He 
who  erects  a  fence,  to  save  the  labor  of  guarding  his 
cattle,  will  certainly  do  wisely  to  keep  his  fence  in  good 
order.  It  is  surely  less  labor  to  mend  a  gap  in  a  fence, 
than  to  be  obliged  to  plant  a  field  a  second  time,  be- 
cause *the  grain  has  been  destroyed  by  cattle,  which 
that  gap  permitted  to  enter.  It  takes  less  labor  to 
mend  a  leakage  in  a  mill  dam,  than  to  rebuild  the  dam 
after  it  has  been,  by  means  of  that  leakage,  carried 
away.  Hence,  we  see  the  importance,  of  keeping 
every  part  of  an  establishment  in  perfect  order,  and 
of  allowing  nothing  to  be  out  of  repair,  if  it  be  possible 
to  repair  it. 

"  I  remember,"  says  Say,  "  being  once  a  witness  of 
the  numberless  misfortunes  which  a  neglectful  house- 
keeping entails.  For  the  want  of  a  small  latch,  the  gate 
of  the  poultry  yard  was  forever  open,  there  being  no 
means  of  closing  it  externally,  and  many  of  the  poultry 
were  lost  in  consequence.  One  day,  a  fine  young  pork- 
er made  his  escape  into  the  woods,  and  the  whole  fam- 
ily, gardener,  cook,  milk-maid,  &c.,  presently  turned  out 
m  quest  of  the  fugitive.  The  garchner,  in  leaping  a 
ditch,  got  a  sprain  that  confined  him  to  his  bed  for  a 
fortnight.  The  cook  found  the  linen  burnt  that  she  had 
left  at  the  fire  to  dry.  The  milk-maid  forgot,  in  her 
haste,  to  tie  up  the  cattle  in  the  cow  house,  and  one  of 
the  loose  cows  broke  the  leg  of  a  colt,  that  was  kept 
m  the  same.  shed.  The  linen  burnt,  and  the  gai don- 
er's work  lost,  were  worth  twenty  crowns,  and  the 
colt  as  much  more,  so  that  forty  crowns  were,  in  a  few 
minutes,  lost,  for  want  of  a  latch  that  would  not  have 
cost  more  than  a  few  sous."  [Pol.  Economy,  Boolt 
3d,  chap.  5.] 

Illustrations  of  the  importance  of  having  every  instru- 
ment in  order,  and  in  place,  are  occurring  m  most  es- 
tablishments every  day.  'I'hey  teach  us,  that  economy 
of  capital,  as  well  as  of  labor,  requires,  that  every  thing 
should  be  done  in  time,  and  in  season  ;  that  if  a  thing 


ECONOMY     OF    LABOR.  377 

need  to  be  done  to-day,  we  have  no  means  which  shall 
enah.e  us  to  estimate  the  loss  that  may  ensue,  by  put- 
ting it  off  until  to-morrow  ;  and,  that  negligence  is  as 
much  at  variance  with  the  laws  of  our  Creator,  as  al)so- 
lute  wastefulness,  inasmuch  as  it  exposes  us  to  equally 
severe  piniishments.  It  would  be  well,  if  men  would 
remember  this,  not  only  in  the  aflairs  of  this  life,  but 
still  more,  in  the  aflairs  of  another. 

Supposing  now  that  both  labor  and  capital  have  been 
invested  upon  the  most  economical  principles.  The 
object  for  which  they  have  been  thus  invested,  is  the 
creation  of  products.  Hence,  the  greater  this  product 
is,  the  more  successful  the  investment,  the  better  is  it 
for  the  individual,  and  the  better  is  it  for  the  t.ommu- 
nity.  The  object  of  the  farmer  is,  with  a  given  soil, 
a  given  expenditure  of  labor,  of  seed  and  of  manure, 
to  raise  the  greatest  amount  of  value,  in  a  harvest. 
This  will  generally,  though  not  always,  be  as  the  quan- 
tity. Fifty  bushels  of  common  apples  will  not  sell  for 
so  much  as  forty  busiiels  of  good  ones.  One  hundred 
pounds  of  coarse  wool,  will  sell  for  much  less  than 
one  hundred  pounds  of  fine  wool.  Hence,  his  object 
should  be,  from  a  given  expenditure,  to  derive  the 
greatest  amount  of  profit.  It  is,  by  thus  adjusting  his 
expenditure,  and  thus  calculating  the  results,  thai  an 
intelligent  and  thoughtful  farmer  will  grow  rich  ;  while 
all  around  him  are  remaining  stationary  or  are  growing 
poor. 

So,  it  is  the  business  of  the  manufacturer  to  create, 
with  a  given  expenditure,  the  greatest  amount  of  value. 
If  he  can  succeed  in  giving  to  his  cloth  a  better  dye,  oi 
can  produce  a  more  durable  or  a  more  tasteful  fabilc, 
or  can  adapt  it  better  to  the  satisfying  of  any  human 
want,  its  value  is,  by  so  much,  increased,  and  he  and 
the  community  are  the  better  for  the  increased  value  of 
his  production. 

It  is  evident,  that,  in  order  to  do  this,  a  systematic 
knowledge  of  the  principles  of  any  employment  is  neces- 
sary to  the  individual  by  whom  it  is  carried  on.  A  man, 
in  order  to  be  a  skilful  producer,  must  be  acquaintef) 
.S2* 


378  ECONOMY     OF     LABOR. 

with  the  laws  of  production  that  is,  those  laws  of  na- 
ture and  of  society,  which  govern  tlie  transaction  in 
which  he  is  engaged.  Hence,  we  see  the  importance  of 
accurate  knowledge,  and  sound  mental  discipline,  to  all 
the  classes  of  society. 

We  see,  in  the  above  remarks,  another  illustration  of 
the  truth,  that  the  benefit  of  one  is  the  benefit  of  all, 
and  the  injmy  of  one  is  the  injury  of  all.  If  a  man 
economize  labor  and  capital,  he  increases  his  own 
wealth,  and  he  also  rescues  as  much  as  he  saves,  from 
actual  destruction.  The  whole  of  this  amount  may  go 
to  the  further  increase  of  production,  or  to  the  satisfying 
of  human  wants.  The  more  he  produces,  the  greater  is 
his  wealth  ;  and  the  greater  is  the  value  which  is  created 
for  the  good  of  the  whole  community.  Hence,  we  see, 
that  he  who  is  honestly  promoting  his  own  welfare,  is 
also  promoting  the  welfare  of  the  whole  society  of  which 
he  is  a  member. 

And  as  it  is  manifestly  for  the  interest  of  the  individ- 
ual, so  is  it  for  the  interest  of  the  society,  that  every 
producer  should  consume  as  little  value,  and  produce  as 
great  value,  as  possible.  Hence,  we  see  the  impolicy 
of  those  restrictions,  which  will  not  allow  the  individual 
to  purchase  and  to  sell  where  he  pleases.  If  he  must 
give  a  higher  price  than  is  necessary  for  his  materialj  this 
is,  by  the  difi'erence,  unprofitable  consumption.  If  he 
cannot  dispose  of  it  where  he  pleases,  this  is,  by  so 
much,  unprofitable  production,  because  he  is  unable  to 
realize  from  his  production  as  much  as  he  \ACuld  be  able 
to  realize,  were  lie  left  to  himself. 


OF  PERSONAL  EXPENSES.  379 


SECTIOiN   11. 

OF    CCASUMPTION    FOR    THE    GRATIFICATION    OF 
DESIRE. 

By  means  of  the  productive  consumption  above  treat- 
ed of,  a  man  procures  tlie  means  for  this  second  kind  of 
consumption  This  means,  however,  it  is  always  to  be 
remembered,  does  not  consist  of  his  whole  production, 
but  only  of  the  excess  of  production  over  consuniption 
If  he  live  on  capital  loaned  at  interest,  the  case  is  the 
same.  The  money  loaned  is,  for  the  time,  consumed. 
The  interest  paid,  is  the  excess  of  the  production  over 
the  consumption,  and  this,  of  course,  is  all  that  he  can 
aj)propriate  to  the  gratification  of  his  desires. 

Consuniption  for  the  gratification  of  our  desires,  may 
be  considered  from  two  points  of  view.  First.  Without 
reference  to  the  circumstances  of  the  individual,  or  to 
the  relative  value  of  the  various  modes  of  gratification  : 
and,  secondly^  with  reference  to  these  circumstances. 

I.  Of  consumption  without  reference  to  the  circum- 
stances of  the  individual,  or  the  relative  value  of  the  mode 
of  gratification. 

Tiiese  purposes  have  been  already  alluded  to.  They 
are  generally  comprehended  under  the  following  partic- 
ulars : 

Expenditures  for  the  necessaries  and  conveniences  of 
living,  as  food,  clothing,  and  shelter;  lor  the  gratification 
of  the  senses  and  the  tastes  ;  for  the  pleasures  of  intel- 
lect ;  for  the  pleasures  of  sc>ciety  ;  and  for  moral  pleas  ■ 
ures.  Under  one  or  other  of  these  simply,  or  under 
seveial  of  them  combined,  I  believe  almost  all  of  our 
expenditures  may  be  classed. 

Now  if  these  be  considered,  irrespective  of  our  cir- 
cumstances, or  of  the  intrinsic  value  of  the  gratific5*tions 
themselves,  the  principles  of  expenditure,  will  be,  essen- 
tially, the  same  as  those  which  have  been  already  illus- 
trated.     That  ic  to  say,  if  a   particular  mode  of  living^ 


380  OF  PERSONAL  EXPENSES. 

or  the  enjoyment  of  a  particular  gratification  be  ddermin' 
ed  upon,  whether  that  deterniinalion  be  wise  or  unwise, 
economy  teaches  us  to  obtain  it  most  perfectly,  and  at 
ihe  least  possible  expense.  The  question  of  its  wisdom 
or  lolly,  belongs  to  another  part  of  the  subject.  A  par- 
ticular mode  of  living  having  been  resolved  upon,  econ- 
omy will  teach  us  to  sustain  it,  at  the  least  possible 
BKpense.    Hence,  in  regard  to  capital,  the  rules  will  be  • 

1.  That  the  consumption  of  values  be  as  small  as  ia 
consistent  with  the  accomplishment  of  our  pur{)03e. 
This  is  opposed  to  several  errors. 

To  purchasing  mare  of  any  value  than  is  wanted. 
The  articles  ordinarily  consumed  in  a  family,  are  rapidly 
destructible.  If  more  be  purchased  than  is  wanted,  it  is 
liable  to  become  useless,  and,  in  this  case,  the  loss  of 
this  excess  is  total.  By  having  a  superabundance  of 
any  thing  consumable,  it  becomes,  in  the  eyes  of  those 
who  use  it,  less  valuable,  and  is  used  less  carefully. 
And,  if  neither  of  these  results  be  experienced,  if  an 
article  be  purchased  a  year  before  it  is  wanted,  the  pur- 
chaser loses  the  interest,  for  a  year,  of  the  money  expend- 
ed. Hence,  it  is  generally  as  economical  to  purchase 
at  retail,  as  at  wholesale. 

Hence,  it  is  commonly  wasteful  to  purchase  any  thing 
because  it  is  cheap.  If  a  nvmneed  any  thing,  its  cheap- 
ness is  a  reason  why  he  should  buy  it,  but  if  he  do  not 
want  it,  its  cheapness  is  no  reason  at  all.  A  man  may 
buy  stones  very  cheap,  but  it  is  doubtful  whether  he 
would  be  either  enriched  or  made  happier  by  the  pur- 
chase. Many  a  garret  is  filled  with  great  bargains ; 
which  were  purchased  because  they  were  cheap,  and 
then  laid  away  to  rot. 

2.  The  consumption  should  be  as  perfect  as  possible. 
When  we  have  possessed  ourselves  of  a  substance,  it 
should  not  be  thrown  away,  until  every  utility  wLch  it 
po§5^sses,  has  teen  exhausted. 

Thus,  an  article  of  clothing  which  will  not  answer 
any  longer  for  one  purpose,  may  answer  very  well  for 
another.  An  article  of  food,  which  may  not  be  used  in 
one  form,  may    be    used    in    some    otli'er   form.     And 


OF  PERSONAL  EXPENSES.  381 

lience.  in  general,  nothing  should  come  into  a  honsd,  un- 
less it  be  wanted,  nor  in  a  larger  amount  tliaa  it  is  want- 
ed ;  and  nothing  should  .eave  it,  until  all  its  utility  is 
exhausted. 

3.  All  tliG  means  should  be  provided  for  the  most 
perfect  production  and  consumption  of  values.  Hence, 
every  useful  utensil  should  be  furnished,  and  should  i)e 
the  most  perfect  of  its  kind.  It  is  cheaper  to  buy  a 
coal-hod,  than  to  carry  coal  in  a  basket,  and,  by  savhig 
a  dollar  in  a  utensil,  ruin  a  carpet  worth  fifty  dollars,  ll 
is  cheaper  to  have  every  description  of  culinary  vessel 
that  may  be  needed,  than  to  have  food  spoiled  by  being 
cooked  in  an  unsuitable  instrument.  It  is  cheaper  to 
have  a  bad  fire  place  altered,  at  an  expense  of  fifteen 
dollars,  than  ^  consume  annually  ten  dollars  more  worth 
of  wood  than  is  necessary. 

Hence,  it  is  also  important,  that  every  article  pur- 
chased be  of  such  a  nature  as  will  admit  of  the  most 
profitable  consumption.  If  a  man  buy  fuel  which  gives 
off  very  little  heat,  because  it  is  at  a  low  price,  it  is  by 
no  means  certain  that  he  has  made  a  successful  |)ur- 
chase.  It  should  always  be  remembered  that  we  want 
a  given  amount  of  utility,  and  not  the  mere  form  ni 
which  it  seems  to  reside.  It  is  cheaper  to  purchase  a 
dollar's  worth  of  utility  for  a  dollar,  than  half  a  dollar's 
worth  for  seventy-five  cents.  Hence,  the  lowest  priced 
products  are  by  no  means  always  the  cheapest. 

The  same  principles  apply  to  labor. 

Economy  directs,  that  in  a  household,  we  should  pur- 
chase as  much  labor  as  we  need,  and  of  the  kind  that 
we  need,  but  no  more  than  we  need.  When  we  pay 
for  useless  labor,  we  throw  money  away  ourselves. 
When  we  employ  incompBtent  labor,  we  pay  others  to 
throw  it  away  for  us. 

These,  I  suppose  to  be  the  principal  circumstances, 
which  should  govern  our  expenditures.  And,  it  will  be 
seen,  that  the^^ppjy  to  all  the  conditions  of  men. 
Whether- our  ex[)en(nture  be  large  or  small,  it  should  be 
conducted  with  economy.  The  object  to  be  attained 
is,  to  secure  as  large  an  amount  of  gratification,  at  as 


382  OF  PERSONAL  EXPENSES. 

small  an  expenditire  as  possible.  To  the  man  who 
has  but  two  hundred  dollars  per  year  to  spend,  it  is  cer- 
tainly important  to  spend  it  economically.  To  the  man 
who  has  ten  thousand  dollars  per  year,  it  will  generally 
be  found  convenient. 

Hence,  it  will  be  seen,  that,  in  order  to  enjoy  the 
comforts  or  the  luxuries  of  life,  at  the  least  expense, 
care  and  superintendence,  and  knowledge  of  the  various 
operations  performed  in  a  household,  are  absolutely  ne- 
cessaiy.  And  as  this  department  of  consumption  in  gen- 
eral, devolves  upon  the  mistress  of  a  family,  we  see  how 
important  to  the  execution  of  it  with  success,  must  be 
vigilance,  care,  intelligence,  and  industry.  The  husband, 
by  the  employment  of  capital,  labor,  and  skill,  in  pro- 
ductive consumption,  secures  an  annual  rwenue,  for  the 
purpose  of  consumption  in  the  various  means  of  gratifi- 
cation, whether  necessary  or  superfluous.  The  expen- 
diture of  this  annual  revenue,  or  the  making  of  those 
arrangements  which  govern  the  expenditure,  generally 
devolves  upon  the  wife.  If  that  expenditure  be  made 
without  economy,  either  the  gratifications  which  it  might 
procur*^,  are  never  enjoyed  ;  and,  by  all  the  consumption, 
neither  comfort  nor  ])lea3ure  is  obtained  ;  or  else,  if  the 
gratification  sought  for  be  obtained,  it  is  obtained  at  an 
expense  absolutely  ruinous.  Hence,  it  will  be  seen, 
that  the  physical  comfort,  as  well  as  the  means  of  hap- 
piness of  both  parties,  depends  more  on  the  domestic 
education  of  the  female  sex  than  is  ordinarily  supposed. 
Affection  will  rarely  exist  in  the  atmosphere  of  self- 
inflicted  poverty.  iVo  man  can  respect  a  woman,  by 
whose  caprice,  and  ignorance  of  her  appropriate  duties, 
he  is  plunged  into  disgraceful  bankruptcy,  and  vvc(ld(!d 
to  hopeless  penury.  Nor  let  it  be  supposed  that  no  tal- 
ent is  requisite  skilfully  to  superintend  a  household.  It 
requires,  at  least,  as  much  ability  to  direct,  with  skill, 
and  on  principle,  the  affairs  of  a  domestic  establishment, 
as  to  select  a  ribbon  or  dance  a  minue^ft  finger  a  })iano 
or  to  eirdnoider  a  fire  screen. 

n.  Consumption  considered  in  respect  to  the  relative 
value  of  the  desire. 


OF    DIFFERENT    MODES     OF    CONSUMPTION        383 

The  various  objects  of  desire,  by  die  possession  of 
which  our  happiness  may  be  promoted,  may,  with  suffi- 
cient accuracy  for  our  present  purpose,  be  divided  into 
moral,  intellectual,  social,  and  sensual. 

Tiie  attainment  of  hap])iness  from  either  of  these, 
commonly  involves  some  expenditure  of  time,  or  of 
projierty,  or  of  both.  Thus,  we  cannot  by  reflection, 
imprtwe  our  own  hearts,  without  the  consumption  of 
•  ime,  nor  cultivate  our  benevolent  sentiments  without  the 
consumption  of  property.  The  imijrovement  of  our 
minds  by  reading  and  study,  demands  both  time  and 
books.  We  cannot  enjoy  the  society  of  our  friends, 
without  the  consmiiption  of  both  time  and  property. 
And  every  one  knows  that  the  gratification  of  our  sens- 
es, whether  intellectual  or  corjjoreal,  consumes  a  large 
portion  of  the  income  of  every  individual. 

It  belongs  to  the  teacher  of  ethics,  to  show  in  which 
mode  of  ex|)enditure  a  man  may  best  secure  his  future 
happiness,  and  act  most  worthily  of  the  moral  nature 
with  which  he  is  endowed.  'L'he  political  economist 
ooks  upon  the  various  modes  of  expenditure,  simply  as 
they  affect  the  loealtk  of  the  individual,  and  of  the  pub- 
lic. Yet,  even  in  this  view,  it  may  not  be  inappropriate 
to  offer  a  sinsrle  suseestion.  [nasmuch  as  we  have  been 
created  with  aptitudes  for  all  these  different  modes  of 
happiness,  it  is  manifestly  the  intention  of  the  Creator, 
that  we  should  enjoy,  not  merely  one  but  all  of  them. 
As  we  are  not  merely  sensual,  but  also  moral  and  intel- 
lectual beings,  it  is  as  reasonable  tl'at  we  shoidd  expend 
a  part  of  our  time  and  propi^ly,  in  the  piu'suit  of  moral 
and  intellectual,  as  that  we  should  speiul  a  part  of  it,  in 
the  pursuit  of  sensual  giaiificalions.  He  who  argued 
from  the  superior  dignity  of  our  nature  over  that  of 
brutes,  might  perhaps  urge  that  the  former  was  tne  more 
reasonable  mode  of  expenditure.  But  the  dignity  of  the 
race  not  belonging  to  the  province  of  the  political  econ- 
omist, we  shall  not  consider  the  subject  in  this  point  of 
view. 

The  principles  upon  which  political  economy  would 
Leach  us  to  select  our  modes  of  gralification,  are,  1  sup 


384       OF    DIFFERENT    MODES    OF    CON  StlMPTION. 

pose,  the  following.  First.  Where  the  aniount  of 
gratification  in  two  cases  is  equal,  it  is  wise  to  choose 
iliat  which  is  the  least  expensive.  The.  reason  for  this 
is  loo  obvious  to  need  much  illustration.  If  a  particular 
gratification  can  be  procured  for  one  hundred  dollars, 
and  another,  which  will  afford  an  equal  amount  of  happi- 
ness, can  be  procured  for  ten  dollars,  the  cheaper  is  to 
be  preferred  ;  because,  while,  in  this  case,  we  obtain  an 
equal  gratification,  we  have  ninety  dollars  remaining  with 
wiiicl)  to  purchase  other  objects  of  desire.  Secondly. 
When  two  modes  of  gratification  are,  in  themselves, 
equally  productive  of  happiness,  but  of  which,  one  tends 
to  the  wealth,  and  the  other  to  the  poverty,  both  of  the 
individual  and  of  society,  the  former  is  to  be  preferred. 
Thus,  if  it  cost  the  same  sum  to  spend  an  evening  in  in- 
tellectual improvement,  that  it  would  cost  to  spend  it  in 
a  diunken  frolic,  and  the  pleasure  in  the  two  cases  were 
the  same  ;  inasmuch  as  intellectual  cultivation  tends  to 
knowledge,  which  is  a  valuable  consideration  to  every 
producer,  and  a  drunken  frolic  has  no  such  tendency, 
economy  would  teach  us  to  spend  the  evening  in  intellec- 
tual cultivation. 

If,  now,  we  compare  the  various  modes  of  expendi- 
ture most  common  among  men,  I  think  that  we  shall  find, 
that  the  economy  of  the  moral  and  intellectual  pleasures 
is  somewhat  overlooked. 

The  expenditures  for  all  the  real  wants  and  conven- 
iences of  a  human  being,  may,  by  industry  and  frugality, 
without  great  difficulty,  be  supplied.  It  does  not  cost 
much,  to  provide  all  that  we  need  for  wholesome  and 
palatable  food,  for  comfortable  clothing  and  shelter,  and 
for  all  the  furniture  demanded  for  convenient  domestic 
arrangements.  Our  greatest  expenses  are  for  those  ob- 
jects, which  yield  no  other  utility  than  the  mere  gratifi- 
cation of  the  senses,  or,  which  are  rendered  necessary, 
by  command  of  fashion,  or  the  love  of  ostentation. 
Thus,  in  the  purchase  of  a  garment,  or  of  an  aiti(l6  of 
furniture,  a  part  of  the  [)rice  is  paid  for  the  real  utility 
which  it  possesses,  and  the  remainder  for  that  particular 
form,  or  color,  or  workmanship,  which  is  designated  by 


OF    DIFFERENT    MODES    OF    CONSUMPTION*.       385 

fashion.  Now,  it  fiequenily  happens,  tliat  this  latter 
portion  of  the  price  is  far  greater  than  the  forni(;r.  The 
same  may  be  said  of  many  of  our  expenses  of  the  table, 
and  of  various  others. 

Now,  that  men  should  not,  if  they  have  the  ability,  in 
any  manner  gratify  their  senses,  and  yield  obedience  to 
fashion,  it  is  not  necessary  here  to  affirm  ;  nor.  is  it  ne- 
cessary that  political  economy  should  prescribe  the  limit, 
within  which  these  gratifications  shall  be  confined.  A 
few  considerations,  for  the  sake  of  illustrating  the  coui- 
pnrative  economical  advantages  of  other  modes  of  grati« 
fication,  is  all  that  will  be  here  attempted. 

1.  Moral  and  intellectual  pleasures  are  by  no  means 
expensive.  To  spend  time  in  moral  cultivation,  is  no 
more  expensive  than  to  spend  it  thoughtlessly  and  frivo- 
lously. The  time  consumed  in  thoughtless  dissipation, 
if  employed  in  moral  culture,  would  be  sufficient  to  efFect 
great  changes  in  our  habits  and  tastes. 

The  pleasures  of  benevolence,  so  far  as  pecuniary 
consumption  is  concerned,  are  less  expensive  than  those 
of  the  senses.  Were  the  snins  lavished  in  thoughtless 
caprice,  in  obedience  to  fashion,  or  in  the  gratification 
of  appetite,  to  be  reserved  for  charity,  how  great  an 
amount  of  happiness  might  be  created  both  in  the  bene- 
factor and  the  recipient. 

The  same  may  be  said  of  intellectual  pleasures 
Books,  and  all  the  means  for  intellectual  gratification, 
may  be  had  at  an  expense  within  the  reach  of  a  very 
large  class  of  the  community.  The  useless  ornaments 
of  a  drawing  room,  would  frequently  purchase  a  (■nnsi<l« 
arable  library.  The  sums  of  money  annually  paid,  by 
most  families,  to  satisfy  the  demands  of  fashion,  would 
provide  them  with  as  much  reading  as  they  would  desire. 
Now,  when  these  two  kinds  of  pleasure  are  equally  set 
before  us,  and  when  the  one  may  be  procured  at  so 
much  less  expenditure  than  the  other,  it  surely  is  worth 
jhe  attention  of  every  man,  deliberately  to  inquire  by 
which  mode  of  investment  he  will  best  seciire  his  own 
happiness.  There  seems  something  ill-adjusted,  when 
the  habitation  of  a  moral  and  intellectual  being,  reminds 
33 


386       OF    DIFFERENT    MODES    OF    CONSUMPTION. 

US  of  every  thing  else  than,  that  he  is  either  moral  or  in 
tellectual. 

2.  Moral  and  intellectual  pleasures  tend  to  the  wealth 
both  of  the  individual  and  of  society. 

The  exercise  of  benevolence  has  several  important 
economical  tendencies.  For  instance,  it  tends  directly 
to  cultivate  the  habits  of  self-denial  and  self-government, 
which  are  so  essential  both  to  industry  and  frugality. 
•  Sensual  self-indulgence  tends  directly  to  produce  both 
indolence  and  capricious  and  reckless  expenditure. 

Again.  The  habit  of  benevolence  tends  to  moderate 
and  correct  that  intense  love  of  gain,  which  is  so  fre- 
quently the  cause  of  ruin  to  enterprising  men.  In  the 
management  of  any  hazardous  business,  he  will  be  the 
most  likely  to  succeed,  who  looks  with  entire  coolness 
on  the  chances  of  loss  and  gain.  The  too  eager,  gov- 
erned by  their  imagination,  rush  into  needless  danger. 
The  too  cautious  allow  a  fair  prospect  of  advantage  to 
pass  by  unimproved.  The  one  is  as  liable  to  fail  as  the 
other.  He  who,  by  the  practice  of  benevolence,  has 
learned  a  more  accurate  estimate  of  the  blessings  of 
wealth,  will  more  probably  than  either,  judge  correctly. 
The  miser  and  the  sensualist  will  fall  into  opposite  ex- 
tremes, one  upon  each  side  of  him. 

IJesides,  the  social  benefits  of  benevolence  are  incal- 
culable. It  unites  together  the  various  classes  of  men, 
by  the  strong  ties  of  affection  and  gratitude.  By  bring- 
ing all  classes  of  men  more  directly  under  the  view  of 
the  whole  mass  of  society,  social  responsibility  is  in- 
creased, and  the  encourageinents  to  virtue  and  the  re- 
straints upon  vice  are  strengthened.  When  the  rich  are 
hard-hearted  and  luxurious,  the  poor  are  disaffected, 
anti-social,  and  destructive.  In  so  far  as  benevolence, 
therefore,  tends  to  the  improvement  of  the  social  dispo- 
sitions of  men,  it  may  lay  claim  to  great  economical  ad- 
vantages. 

And  the  sairie  is  true  of  intclh^ctual  jjleasures.  A 
man  cannot  enjoy  these  without  improving  his  mind,  and 
rendering  it  a  more  valuable  instrument  both  for  th(i  pro- 
duction of  his  future  happiness,  and  the  accumulation  of 


OF    DIFFERENT    MODES    OF    CONSUMPTION.        'j87 

wealth.  Knowledge  is  power,  in  what  sj)here  of  life 
soever  it  be  exerted.  The  gratification  of  tlie  senses 
enervates  the  body,  enfeebles  the  mind,  and  tends  to 
render  intellectual  exercise  unpleasant,  and  to  niidt  us 
for  any  iiuportan  Oi  li;>:;hly  responsible  exertion. 


CHAPTER  THIRD. 

OF    PUBLIC    CONSUMPTION 


SECTION  I. 

OF    TAXES,    OR    THE    MANNER    IN    WHICH     PUBLIC 
EXPENDITURE     IS     PROVIDED     FOR. 

We  have  thus  far  treated  of  indivifkial  consumption, 
or  of  that  destruction  of  values  effected  by  the  Individ- 
ual,  in  the  accomplishment  of  his  own  purposes  ;  and  for 
the  gratification  of  his  own  desires.  But,  all  the  capital 
produced  by  a  society,  is  not  expended  in  this  manner 
A  part  of  the  annual  revenue  of  every  individual,  is  con- 
tributed in  some  manner  to  the  public,  and  is  expended 
by  the  agents  of  the  public,  that  is,  by  the  government. 
Tliis  part  remains  to  be  treated  of,  under  the  head  of 
public  consumption. 

This  expenditure  is  provided  for  by  means  o^  taxation. 
When  a  given  sum  is  to  be  raised  for  the  accomplish- 
ment of  any  object,  it  is,  by  some  mode  of  assessment, 
distributed  among  the  various  individuals  of  tlie  commu- 
nity, and  every  one  is  obliged  to  pay  the  proportion  with 
wliich  he  is  charged.  The  sum  thus  collected  is  then, 
for  the  accomplishment  of  particular  purposes,  consumed 
by  the  agents  into  whose  hands  it  is  delivered.  The 
consumption  itself  is  of  precisely  the  same  nature  as  tliat 
effected  by  individuals,  that  is,  the  value  is  destroyed  ; 
and  (he  utility  consumed,  is  annihilated.  Tf  an  individual 
bin'u  gunpowder,  tlie  value  in  time  and  material  by  which 
it  was  produced  is  destroyed  ;  if  a  hundred  or  a  thousand 
men  do  It,  the  result  is  the  same.  If  a  man  in  the  dig- 
ging of  a  ditch  consume  the  labor  of  a  thousand  work- 


OF    PUBLIC     EXPENDITURE.  389 

men,  and  use  the  provisions  necessary  for  their  susten- 
lation,  the  whole  value,  thus  ex|)ended,  is  annihilated. 
And  if  a  thousand  men  unite  in  the  undertaking,  the  an- 
nihilation is  the  same.  This  is  really  so  evident,  that  to 
dlustrate  it  at  length  seems  almost  childish.  Does  any 
one  doubt  when  a  house  is  burnt  down,  whether  the  value 
of  a  house  is  or  is  not  consumed,  because  the  owner  did 
not  set  fire  to  it  himself.  Does  any  merchant  doubt, 
whether  his  property  is  diminished  or  not,  when  it  has 
been  wasted  by  a  profligate  clerk  ?  In  a  word,  govern- 
ment is  nothing  but  a  system  of  agencies  ;  and  property 
consumed,  by  the  government,  is  as  really  consumed, 
and  its  value  as  really  destroyed,  as  though  the  individual 
citizens  consumed  it  themselves. 

Now,  this  being  the  fact,  the  rule  by  which  consump- 
tion is  to  be  judged  of,  is  precisely  the  "Same,  whether  it 
be  public  or  private.  If  the  product  created  by  the 
consumption,  whether  that  product  be  material  or  imma- 
terial,  be  of  greater  value  than  the  product  consumed,  it 
is  profitable  consumption  ;  that  is,  the  public  receive  in 
return  a  greater  value  than  they  parted  with.  If  a  less 
valuable  product  be  created,  than  is  consumed,  it  is  un- 
profiiable  consumjition,  and  the  value  might  better  have 
remained  in  the  hands  of  individuals.  If  no  product 
whatever  be  realized,  it  is  a  total  loss  ;  and  the  value 
taken  from  the  individual  might  as  well  have  been  thrown 
into  the  sea.  Nay,  had  they  themselves  thrown  the  val- 
ue.consumed  into  the  sea,  there  would  have  been  a  gain, 
in  the  amount  of  the  expense  of  colleoing  and  consuming 
it.  And  still  more,  if  the  value  consumed  produce  no 
valuable  result,  but,  on  the  contrary,  be  employed  to 
promote  the  purposes  of  oppression  and  misrule,  the 
evil  is  enormous.  The  possessions  of  the  individual  are 
taken  away,  not  only  without  rendering  him  an  equiva- 
lent, but  for  the  sake  of  employing  other  men  to  torment 
him,  and  deprive  him  of  his  dearest  rights. 

It  is  very  fre(|uenily  asserted,  that  public  expenditure 
enriches  a  country,  or  that,  at  least,  it  is  wholly  inno- 
cent, since  it  quickens  the  circulation  of  money,  and 
does  no  harm,  inasmuch  as  all  the  money  always  remains 
33* 


390  OF    PUBLIC    EXPENDITURE. 

m  the  country.  To  obviate  such  an  objection,  Ifit  us 
trace,  from  first  lo  last,  the  passage  of  a  product  towards 
uhiniate  consumption,  on  tlie  pubhc  account.  The  gov- 
ernment  exacts  from  the  tax  payer,  the  payment  of  a 
given  sum  in  the  shape  of  money.  To  meet  this  de- 
mand, the  tax  payer  exchanges  part  of  the  products  at 
his  disposal,  for  coin,  which  he  jiays  to  the  tax  gatherer. 
A  second  set  of  government  agents  is  busied,  in  buying, 
with  that  coin,  clothing  and  other  necessaries  for  sol- 
diery Up  to  this  point,  there  is  no  value  either  lost  or 
consumed  ;  there  has  only  been  a  gratuitous  transfer  of 
value  and  a  subsequent  act  of  barter,  but,  the  value  con- 
tributed by  the  citizen,  still  exists  in  the  shape  of  stores 
and  supplies  in  the  military  depot.  In  the  end,  how 
ever,  this  valuers  consumed,  and  then  the  portion  of 
wealth  which  passes  from  the  hands  of  the  tax  payer, 
into  those  of  the  tax  gatherer,  is  destroyed  and  annihilated 

"  Yet,  it  is  not  the  sum  of  money^  that  is  destroyed  ; 
that  has  only  passed  from  one  hand  to  another,  either 
with  or  without  any  return,  as,  when  it  passed  from  the 
tax  payer,  to  the  tax  gatherer  ;  or  in  exchange  for  an 
equivalent,  as  when  it  passed  from  the- government  agent 
to  the  contractor,  for  clothing  and  supplies.  The  value 
of  the  money  survives  the  whole  operation,  and  goes 
through  three  or  four,  or  a  dozen  hands,  without  any  sen- 
sible alteration.  It  is  the  value  of  the  clothing  and  ne- 
cessaries that  disappears,  with  jirecisely  the  same  effect, 
as  if  the  tax  payer  had,  with  the  same  money,  jHwchascd 
clothing  and  necessaries  for  his  own  })rivate  consump- 
tion." * 

The  consumption,  then,  is  of  the  same  nature,  wheth- 
er it  bo  public  or  private.  It  is  a  destruction  of  value  ; 
and  the  rule,  by  which  we  are  to  determine  whether  it 
be  profitable  or  unjirofitable,  is  the  same  in  both  cases. 
It  is,  by  inquiring,  whether  the  benefit  created  by  the 
consumption,  is  greater  than,  equal  to,  or  less  than,  the 
t^alue  of  the  product  consumed. 

While,  however,  this  rule  is  always  to  be  adopted,  it 
is,  as  in  the  case  of  individual  consumjition,  to  be  inter- 

»  Say 


OF    PUBLIC    EXPENDITURE.  391 

preted  with  a  liberal  and  inteUigent  forecast.  It  must 
not,  of  course,  always  be  expected,  that  the  produei 
created  by  consumpiion,  will  be  a  visible,  tangible,  ma- 
terial substance.  Thus,  we  see  no  physical,  tangible 
product,  as  the  result  of  taxes  for  the  support  of  civil 
government.  But,  we  receive  the  benefit  in  security  of 
persons,  property,  and  reputation  ;  or  in  that  condition 
of  society,  which,  though  it  be  incapable  of  being 
weighed  and  measured,  is  absohnely  essential  both  to  in- 
dividual "happiness,  and  individual  accumulation.  The 
same  may  be  said,  in  substance,  concerning  the  taxes 
paid  for  general  education.  Here,  whether  the  tax  pay- 
er receive  his  remuneration  in  instruction  given  to  his 
own  children,  or  not,  he  yet  receives  it,  in  the  improve- 
ment of  the  intellectual  and  social  character  of  his  neigli- 
bors,  by  which  his  property  is  rendered  more  secure, 
the  labor  for  which  he  pays  is  belter  performed,  and  the 
demand  for  whatever  he  produces,  is  more  universal  and 
more  constant.  The  same  may  be  said  of  that  public 
expenditure,  by  which  the  moral  and  social  character  of 
a  cc/unnunity  is  elevated,  the  taste  of  a  nation  refined, 
and  an  impulse  given  to  efiorts  for  the  benefit  of  man. 
With  this  view,  no  one  could  oppose  the  expense  incur- 
red in  bestowing  upon  public  edifices  elegance,  or  even, 
in  some  cases,  magnificence  of  structure  ;  in  the  public 
celebration  of  remarkable  eras  ;  and  in  the  rewards  be- 
stowed upon  those  who  have  by  their  discoveries  enlarged 
the  boundaries  of  human  knowledge,  or,  by  their  inven- 
tions, signally  improved  the  useful  arts.  Political  Econ- 
omy is  opposed  to  nene  of  these  forms  of  expenditure  ; 
all  that  she  requires  is,  that  a  valuable  consideration  Ije 
received  in  return  for  the  consumption  ;  and  that  the. 
consumption  be  rot  disproportionate  to  that  considera- 
tion. 

Of  the  different  modes  by  ickicli  the  public  expendi- 
ture is  provided  for. 

Taxes  are  of  two  kinds,  direct  and  indirect. 

A  direct  tax,  is  a  certain  amount  assessed  njion  every 
individual,  in  proportion  to  the  property  which  he  is 
knowii  to  posses.     In  many  of  the  towns  of  New  Eng- 


392  OF    PUBLIC     EXPENDITURE. 

land,  an  annual  tax  list  is  made  out,  in  which  the  portion 
which  every  taxable  inhabitant  must  pay,  towards  sup- 
porting the  expenses  of  the  district,  is  specified.  The 
apportionment  is  made  out  by  persons  appointed  for  the 
purpose,  called  assessors.  If  any  individual  consider 
himself  as  taxed  too  highly,  he  is  at  liberty  to  appear, 
and  declare  upon  oaih,  the  amount  of  properly  of  which 
he  is  possessed.  His  assessment  is  then  graduated,  ac- 
cording to  the  amount  to  which  he  has  svvorn- 

An  indirect  tax,  is  levied  upon  articles  of  production, 
at  some  period  during  their  passage  from  one  possessor 
to  another.  Thus  a  tax,  or  as  it  is  called  a  duly,  is  laid 
by  this  country  on  various  goods  imported  from  abroad, 
mimediately  on  their  arrival.  This  duty  is  paid  by  the 
merchant  who  receives  them  ;  and  he  adds  this  duty  to 
the  cost  of  the  goods,  when  he  sells  them  to  the  next 
purchaser.  Thus,  the  price  of  the  product  is  raised,  by 
this  amount,  when  it  comes  into  the  hands  of  the  con- 
sumer. If  broadcloth  pay  a  duty  of  two  dollars  a  yard, 
he  who  buys  a  yard  of  broadcloth  pays  two  dollars  a 
yard  more  for  it  than  he  would  pay  if  there  were  no  du- 
ty to  be  paid.  If  coal  be  taxed  two  dollars  a  ton,  as  it 
is  at  present,  every  consumer  of  foreign  coal  pays  two 
dollars  a  ton  more  than  he  would  pay  if  no  such  tax 
were  exacted.  The  eflect  of  this  lax  is  also  to  keep 
the  price  of  all  other  coal  two  dollars  a  ton  higher  than 
it  would  otherwise  be. 

Now,  su})posing  the  same  sum  were  to  be  demanded 
for  the  service  of  the  public,  it  may  be  asked,  which 
mode  of  raising  it  is  to  be  pieferrec^ 

In  favor  of  an  indirect  tax  it  may  be  urged,  that  it  is 
raised  with  more  convenience,  and  less  liability  to  per- 
sonal collision,  between  the  tax  payer  and  the  tax 
gatherer. 

The  imports  of  a  country  are  all  received  at  a 
comparatively  small  number  of  places,  denominated 
ports  of  eatry.  Uoods  arriving  at  these  places  are  all 
charged  with  the  duty  on  their  arrival  ;  and  thus,  the  col- 
lection may  all  be  accomplished  in  a  short  time,  and 
with  very  little  trouble.     Besides,  as  the  importer,  who 


OF    PUBLIC     EXPENDITURE.  393 

pays  the  duty,  receives  it  back  again  from  the  purchaser 
of  tlie  goods,  it  seems  to  him  a  matter  of  small  impor- 
tance whether  it  be  iiigh  or  low,  and  he  is  disposed  to 
make  but  little  trouble  about  it.  The  case  is  the  same 
with  every  succeeding  purchaser,  until  it  comes  at  last 
to  the  consumer.  The  consumer  may  feel  that  the  prod- 
uct is  dear,  but,  if  it  be  no  dearer  than  it  has  been  be- 
fore, he  thinks  but  little  about  it  ;  and,  if  it  be  some- 
what dearer  than  formerly,  the  rise  and  fall  in  the  j)rire 
of  goods  is  so  common  a  thing,  that  he  imputes  the  dif- 
ference to  any  otlier  cause,  as  soon  as  to  the  additional 
duty  paid  to  the  government.  Hence,  it  is  frequently 
said,  that  people  do  not  feel  an  indirect  tax.,  which 
means,  I  suppose,  that  they  do  not  know,  either  how 
much  they  pay,  or  when  they  pay,  or  whether  they  pay 
or  not. 

On  the  contrary,  it  is,  doubtless,  the  fact,  that  men 
feel  direct  taxes  more  sensibly,  that  is,  they  know  when 
they  pay  them,  and  how  much  they  pay.  Here,  then, 
is  liability  to  ill  feeling,  and  sometimes  to  resistance  ; 
and,  moreover,  there  is  a  possibility,  that  an  excessive 
parsimony  may  restrict  the  public  means  in  such  a  man- 
ner, as  to  prevent  the  execution  of  works  of  real  utility, 
if  not  of  imperative  necessity. 

There  is,  however,  a  greater  liability  of  injustice  in 
indirect  than  in  direct  taxation.  As,  when  duties  are 
laid  upon  goods,  the  tax  payer  knows  very  Ittle  of  the 
amount  paid,  and  is  hence  less  careful  to  mquire  on 
what  piinciples  the  revenue  is  raised  ;  there  is  a  greater 
opportunity,  aflbrded,  in  this  manner,  of^  imposing  the 
public  burdens  unequally,  and  of  imposing  them  for 
purposes  at  variance  with  the  principles  of  the  social 
compact.  Hence,  a  majority  may  impose  taxes  for  the 
benefit  of  a  part,  and  not  for  the  benefit  of  the  whole  ; 
and  the  matter  can  easily  be  so  mystified,  that  the  suf- 
ferer can  excite  but  little  sympathy.  I  do  not  deny 
that  direct  taxation  is  liable,  in  some  cases,  to  the  same 
abuse,  as,  fjr  instance,  when  the  city  and  country  inter- 
ests strive  tJ  shift  the  burden  of  taxation  upon  each  oth- 
er.    I  only  say,  tliat  the  evil  is   not  so  liable  to  happen 


394  OF    PUBLIC     EXPENDITURE. 

in  the  one  case   as   in   the   other,  and  when  it  does  hap- 
pen, it  is  more  readily  exposed. 

Aside  Iroin  tlie  irregularity  in  the  assessment  of  indi- 
rect taxes,  it  may  be  observed,  that,  in  their  very  nature, 
they  are  liable  to  objection,  because  they  do  not  im- 
pose the  public  burden  in  any  manner  in  proportion  to 
the  share  which  the  individual  receives  of  public  pro- 
tection. The  indirect  tax  is  paid  by  the  consumer. 
Hence,  he  pays,  not  according  to  the  benefit  which  he 
receives  from  the  existence  of  civil  government,  but  ac- 
cording to  the  amount  of  production  which  he  consumes. 
Hence,  he  who  possesses  a  million  dollars'  worth  of 
property,  if  he  consume  no  more  than  he  who  lives  by 
his  daily  labor,  will  pay  no  larger  share  of  the  public  bur-  "^ 
den.  Hence,  a  manifest  inequahty  is  involved  in  the 
original  conception  of  an  indirect  tax. 

The  same  remark  may,  however,  be  applied  in  part  to 
direct  taxation.  It  may  be  said,  that  the  tax  payer  here 
raises  his  price,  in  such  a  manner  that  he  only  pays  a 
part  of  the  tax  assessed  upon  him,  and  that  the  remain- 
der is  paid  by  the  consumer.  This  is,  in  part,  true,  but 
I  think  not  by  any  means  to  the  extent  that  it  is  true  of 
indirect  taxation  He  whose  actual  property  is  taxed, 
cannot  raise  the  price  of  his  commodities,  with  such  ac- 
curacy as  the  merchant,  but  must  bear  his  proportion 
without  the  ability  of  so  readily  shifting  it  upon  another. 
Hence,  direct  taxes,  if  equally  imposed,  are  commonly 
more  just  ;  that  is,  they  derive  the  support  of  govern- 
ment from  the  individuals,  more  in  proportion  to  the 
degree  of  benefit  which  each  derives  from  the  govern- 
ment. * 

In  favor  of  direct  taxation,  it  may  also  be  added,  that 
it  is  decidedly  more  in  harmony  with  the  genius  of  a  re- 
publican or  representative  government.  Such  a  govern- 
ment, proceeds  upon  the  principle  that  the  people  are  the 
fountain  of  power,  and  are  competent  to  govern  them- 
selves. Now,  such  a  government  ought  not,  surely,  to 
act  upon  the  directly  opposite  principle,  that  the  people 
ough»  not  to  know  what  they  pay,  or  ichcn  or  how  they 
pay.      They  are  the  party,  from  which,  especially,  noth- 


PRINCIPLKS    OF    TAXATION.  395 

ing  of  this  sort  should  be  concealed.  They  slioiild 
jCiiow  ichat^  and  Iiolo  mucli^  they  coniiibute;  and,  also, 
in  what  manner  whatever  they  contribuie  is  expended. 
It  is  in  this  knowledge,  and  in  the  judicious  use  cf  it, 
that  their  safety  consists.  To  nie,  therefore,  the  consid- 
eration, so  frequently  urged  in  favor  of  indirect  taxation, 
that  the  people  do  not  feel  it,  is  one  of  the  strongest 
arguments  against  it.  The  more  a  people  feel  taxation, 
and  tlie  more  jealously  they  watch  over  the  public  ex'^j 
penditure,  the  better  it  is  for  them  and  for  their  rulers.   '" 

Of  the  principle  by  xohich  taxation  should  be  rtgu- 
latcd. 

J  have  already  stated  that  the  several  members  of  a 
society,  should  be  taxed  in  proportion  to  the  benefit 
which  they  receive  from  a  government.  Thus,  if  a 
government  protects  for  one  man,  one  hunared  thousand 
dollars'  worth  of  property,  and  for  anotner  only  one 
thousand  dollars'  worth,  the  former  should  pay  one  hun- 
dred times  as  much  towards  the  public  expenses,  as  the 
latter.  So  far  as  this  is  evidently  just.  But  it  may  be 
questioned  whether  justice  might  not  go  somewhat  fur- 
ther, inasmuch  as,  a  percentage  of  his  income,  which 
would  not  abridge  even  the  luxuries  of  the  rich,  might 
materially  curtail  even  the  necessaries  of  the  poor.  But 
whether  the  rich  ought  to  be  taxed  more  than  a  pro  rata 
proportion  or  not,  1  think  it  evident  that  taxes  should  be 
so  arranged,  that  individuals  should,  in  so  far  as  possible, 
pay  in  proportion  to  their  property  ;  that  is,  in  propor- 
tion to  the  amount  of  protection  which  they  receive  of 
the  government.  Now,  inasmuch  as  indirect  taxation, 
if  laid  indiscriminately,  would  apportion  tiie  public  bur- 
den on  no  such  principle,  it  is  evident  that  such  taxa- 
tion should  be  made  discriminately  ;  that  is,  that  articles 
of  necessity  should  be  either  ex^pt  from  taxation,  or 
taxed  very  lightly ;  and  articles  of  luxury,  or  those  used 
chiefly  by  the  rich,  should  bear  the  greater  part  of  the 
burden. 

'J'liis  would  lead  us  to  the  following  conclusions : 

1  Property  below  a  certain  amount,  might  very 
properly  be  exempt  from  taxation.  ^ 


396  PRINCIPLES     OF    TAXATION 

The  poor  man's  clothes  and  bedding,  his  cow  and  his 
pig,  should  never  be  enianerated  among  taxable  prop- 
erty. 

2.  The  necessaries  of  Hfe,  if  taxed  at  all,  should  be 
taxed  at  the  lowest  rates.  Of  these,  the  rich  and  poor 
must  consume  n(;arly  equal  quantities.  But  they  con- 
sumt  only  a  fraction  of  the  rich  man's  income,  while 
they  consume  almost  the  whole  of  the  poor  man's  earn- 
ings. A  tax  on  bread  stuffs,  fuel,  coarse  clothing,  or 
iron,  diminishes,  essentially,  the  comforts  and  even  the 
necessaries  of  life,  of  a  very  large  proportion  of  every 
community. 

3.  Taxation  should  be  the  heaviest  upon  articles  of 
luxury  and  ostentation  ;  not  for  the  sake  of  interfering 
with  these  modes  of  pursuing  happiness,  but  because 
those  who  are  able  to  expend  in  this  manner,  are  able  to 
bear,  with  the  least  inconvenience,  the  expenses  of  gov- 
ernment. The  conveniences  oi  living,  and  the  means  of 
accumulation,  should  bear  the  next  portion  of  the  bur- 
den. He  who  is  able  to  furnish  himself  with  the  con^ 
ceniences  of  living,  is  always  able  to  pay  a  portion  of  the 
expenses  of  government  ;  and  he  who  possesses  means 
of  accumulation,  can  always  devote  some  part  of  that 
which  is  annually  accumulated,  to  pay  for  the  protection 
which  he  receives.  Thus,  carpeting,  is  a  more  fit  sub- 
ject for  taxation  than  bread  stuffs  or  fuel.  Thus,  also, 
a  farmer's  wagon,  or  a  merchant's  ship,  may  justly  be 
taxed,  but  they  ought  not  to  be  taxed  in  the  same  pro- 
portiorras  a  gentleman's  coach.  J  have  spoken  of  the 
expenses  of  civil  society,  as  a  public  burden.  It  ought, 
however,  to  be  remarked,  that  this  is  one  of  the  burdens 
which  a  good  citizen  should  be  the  most  willing  to  sus- 
tam  ;  as  it  is  a  mode  of  expense,  for  which  he  receives  a 
most  abundant  equivaifnt.  If  any  one  doubt  this,  let  iiim 
ask  himself,  what  expense  would  be  necessary  to  secure 
for  him,  and  his  property,  that  protection  which  he  now 
receives  in  return  for  the  trifling  sum  which  he  pays  in 
taxes.  The  sum  paid  for  the  necessary  expenses  of 
civil  government,  is  very  iiifling,  when  compared  with 
ihat  vhich  is  annually  enpended  in  journeys  of  pleasure, 


EXPENSES    OF    CIVIL    GOVERNMENT.  397 

in  luxuries  of  the  table,  in  ornaments  of  dress,  nay,  in 
profligJite  aniuseiuenis,  and  vicious  iiululgences.  Kvery 
good  citizen,  while  he  is  under  obligation  vigilantly  to 
watch  over  the  manner  in  which  public  money  is  appro- 
priated, is  bound  to  contribute,  cheerfully  and  liberally- 
ibr  every  purpose  required  by  the  public  good. 

It  will  scarcely  be  necessary  to  add,  after  what  has 
been  said,  that  a  surplus  revenue  is  a  public  nuisance. 
It  gives  to  the  government  a  control  over  the  monetary 
affairs  of  the  country,  at  the  best,  dangerous  ;  and  a  con- 
trol which  is  very  liable  to  be  exerted  for  the  promotion 
of  party  ptirposes.  It  hence  gives  an  additional,  an  un- 
necessary, and  a  dangerous  power  to  a  majority,  and 
gives  them  the  means  of  perpetuating  that  power,  indefi- 
nitely. It  is  taking  productive  capital  from  the  hands 
of  the  owt.ers,  and  vesting  it  in  hands  whei^  there  is 
every  temptation  to  spend  it  uselessly,  if  not  viciously. 
The  world  has  never  yet  seen  a  government  so  pure,  that 
it  would  not  become  corrupt,  if  a  surplus  revenue  were 
permanently  placed  at  its  disposal.* 


SECTION  II. 

OP    THE    PURPOSES     FOR     WHICH     THE     PUBLIC 
REVENUE    IS    COMMONLY    EXPENDED. 

The  funds  of  the  public,  after  they  have  been  col- 
lected, are  most  commonly  expended  for  some  or  for 
all  of  the  following  purposes.      The   support   of   Civil 

*  Of  that  portion  of  the  lato  surplus  rovenue  which  has  btei\  dis- 
tributed aiiiontr  the  States,  the  greater  part  has  already  been  appropri 
ated  to  internal  improvements  of  very  doubtful  utility.  iS'o  man  cai\ 
look  upon  such  a  waste  of  property  without  pain,  especially  when  he 
remembers,  that  these  millions  were  raised  by  obliirinir  the  poor  man 
to  pay  a  hiixlier  price  for  his  coat,  his  axe,  his  loaf  of  bread,  his  salt, 
and  liis  fuel 

34 


398  EXPENSES    OF    CIVIL    GOVERNMENT. 

Government  ;  Education  of  the  people  ;  The  mainten- 
ance of  tlie  institutions  of  Religion  ;  National  improve- 
ments ;  Pauperism  ;  and  War.  Of  these,  we  shall  now 
proceed  to  treat  in  their  order.  The  principles  which 
we  have  already  illustrated,  will,  however,  render  it  un- 
necessary to  consider  them  at  great  length.  A  few  re- 
marks upon  each,  will  be  all  that  we  shall  here  attempt 

I.    Of  expenses  for  the  support  of  civil  government. 

This  is  by  far  the  most  necessary  of  any  of  the 
objects  of  public  expense.  Without  government  there 
could  be  no  society  ;  and  without  society,  there  could 
neither  be  redress  of  wrong,  nor  security  of  property. 
But  government  cannot  be  administered  without  officers, 
and  no  one  will  devote  himself  to  the  discharge  of  the 
duties  of  Civil  office,  unless  he  be  paid  for  it. 

The  principles  which  should  govern  this  branch  of  ex- 
penditure, are  therefore  few  and  simple. 

1.  Economy  requires,  that  precisely  such  talent  should 
be  employed,  in  the  various  offices  of  civil  government, 
as  may  be  necessary  to  insure  the  discharge  of  the  duties 
of  each  office,  in  the  best  possible  manner.  Many  of 
these  offices,  can  only  be  discharged  successfully,  by  the 
first  order  of  human  talent,  cultivated  by  learning  and  dis- 
cipline, and  directed  by  incorruptible  integrity.  Nov/  it 
is  certainly  bad  economy,  to  emjjloy  inferior  talent  to  do 
badly,  that  which  can  only  be  of  any  service  when  it  is 
done  well. 

2.  Hence,  the  salaries  of  judicial,  legislative,  and  ex- 
ecutive officers  should  be  such  as  will  command  the  ser- 
vices of  such  talent  as  the  duties  of  each  office  require. 
It  is  most  unwise  parsimony,  to  give  to  a  judge  such 
a  salary  as  will  command  the  services  of  nothing  inore 
than  a  third  rate  lawyer  ;  and  it  is  mean  to  ask  an  indi- 
vidual to  do  a  service  for  the  community,  at  a  lower  rate 
than  that  at  which  he  would  do  it  for  an  individual. 

In  answer  to  this,  it  may  be  said,  that,  by  bestowing 
large  salaries  upon  the  officers  of  government,  we  pre- 
sent temj)iaiions  to  avarice.  But,  I  reply,  the  reduction 
of  salaries,  by  no  means  diminishes  the  evil.  Were 
cniolument  to  be  reduced,  there  would  always  be  a  con- 


EXPENSES  FOR  EDUCATION.  399 

test  for  office.  The  only  question  then  is,  whether  we 
shall  have  the  contest  between  men  of  li^gli  or  between 
men  of  loio  ciiaracter  ;  between  tl)ose  who  are  capable 
of  serving  us  to  our  advantage,  or  those  who  are  only 
capable  of  serving  us  to  our  disadvantage.  Were  the 
most  important  trusts  in  the  government  to  command  no 
higher  salaries  than  the  wages  of  day  laborers,  thqre 
would  be  as  great  competition  for  tiiem  as  at  present  ; 
only,  then,  the  contest  would  b(  between  day  laborers, 
instead  of  being  between  men  o(  professional  ability. 

Here,  however,  I  am  willing  to  allow  that  the  princi- 
ples of  wages  formerly  illustrated,  should  have  their  full 
ert'ect.  For  instance,  where  an  office  confers  rank,  or 
dignity,  or  indicates  professional  eminence,  the  emolu- 
ment should  be  less  than  would  otherwise  be  paid  for  the 
same  amount  of  service.  Again  :  when  an  office  is  per- 
manent, the  emolument  should  be  less  than  when  it  is 
temporary.*  But,  on  the  other  hand,  if  it  be  insisted 
upon,  that  neither  rank  nor  consideration  shall  be  allowed 
to  the  public  officer,  but  that  all  men  are  and  nuist  show 
themselves  to  lie,  on  a  level  ;  the  remuneration  of  office 
should  be  higher.  And  also,  when  an  office  is  tempo- 
rary, and  the  having  held  it,  disenables  the  incumbent 
for  subsequent  professional  employment,  the  remunera- 
tion should  rise  accordingly.  In  such  cases,  a  pension 
should  be  attached  to  the  office,  if  its  duties,  for  a  given 
time,  have  been  faithfully  dischai-^ed. 

n.    Of  expenses  for  the  purpose  of  education. 

1.  Education  is  of  two  kinds,  common  and  scientific. 
Common  education,  is  limited  to  the  teaching  of  those 
branches  of  which  a  knowledge  is  neces.sary  in  the  pur- 
suit of  tile  ordinary  occupations  of  life.  This  is  a 
proper  object  for  national  expenditure,  because  it  is  for 
the  interest  of  every  man,  that  every  other  man  should 
be  acquainted  with  the  elements  of  learning.  Specially 
is  this  the  case  in  a  representative  government. 

A  question,  however,  occurs,  both  as  to  the  mannet 
in  which  such  a  revenue  should  be  raised,  and  the  man- 
ner in  which  it  should  be  distributed.  It  may,  for  in- 
stance, be  raised  like   any  other  tax,  and   paid  into  the 


400  EXPENSES  FOR  EDUCATION. 

public  chest,  and  the  teachers  be  paid  as  officers  of  the 
government.  Or,  it  may  be  raised  in  tlie  different  dis- 
tricts in  which  the  schools  are  to  be  supported,  and  paid 
into  the  hands  of  district  officers,  who  both  oversee  the 
schools  and  employ  the  teachers.  The  latter  seems  to 
be  the  preferable  method.  In  this  manner,  there  will  be 
by.  far  the  most  lively  interest  maintained  in  behalf  of  the 
schools,  the  appropriation  of  money  will  be  more  vigi- 
lantly guarded,  and  the  teachers  will  more  probably  be 
appointed  on  account  of  their  skill  and  ability.  The 
appointment  of  so  many  teachers  could  rarely  be  efFecled 
by  a  central  government,  with  either  skill  or  fidelity. 
And  the  community,  having  no  interest  either  in  the  se- 
lection or  the  remuneration  of  the  teacher,  would  rarely 
take  that  interest  in  the  subject  of  education,  which  the 
good  of  the  pupils  requires. 

On  this  subject,  the  principles  to  be  kept  in  view  seem 
to  be  simple.  It  seems  necessary,  that  ^ery  district 
sufficiently  large  to  maintain  a  school,  sliould  be  obliged 
to  maintain  one,  and  that,  for  tliis  purpose,  the  necessary 
funds  be  raised  by  the  authority  of  the  public.  When, 
however,  these  funds  have  been  raised,  they  may  safely 
be  left  in  the  power  of  each  district  itself,  in  tiie  belief, 
that  those  who  have  themselves  earned  and  contributed 
the  money,  will  be  more  likely  than  any  other  persons, 
to  disburse  it  skilfully  and  economically.  Besides  this, 
as  upon  such  a  system,  teachers  will  be  wanted  in  large 
numbers,  it  may  be  desirable  that  seminaries  be  estab- 
lished for  the  special  purpose  of  educating  them.  This 
will  give  uniformity  to  the  system  of  instruction,  and 
enable  the  science  of  education,  throughout  a  whole 
community,  the  more  easily  to  keep  pace  with  the  pro- 
gress of  science,  in  other  departments  of  knowledge. 

2.   Of  scientific  education. 

That  the  cultivation  and  the  difTusion  of  science  is 
greatly  advantageous  to  a  whole  community,  does  not,  I 
trust,  require  proof.  Nations  are,  at  present,  princi- 
pally enriched  by  the  result  of  discovery  and  invention  ; 
and  in  consequence  of  the  general  difiusion  of  knowledge 
end  intelligence.      That  a  portion  of  the  national  revenue 


EXPENSES  FOR  EDUCATION.         401 

should  be  directed  to  tlie   promotion  of  these  objects, 
seems  both  eijuiiable  and  wise. 

As  both  the  cullhal'wn  and  .the  dijj'usion  of  science 
may  be  performed  by  the  same  individuals,  and,  as  the 
san)e  instruments  are  needful  for  both  pur|)oses,  these 
two  objects  have  been  commoidy  united.  The  design 
of  an  establishment  for  scientific  education  is  two  fold. 
1st.  'Vq  diffuse  nbioad  the  knowledge  already  existing, 
and  2dly,  to  add  to  the  amount  of  knowledge  that  now 
actually  exists.  Seminaries  of  learning  have  rarely  beci) 
successful  in  accomplishing  either  one  of  these  objects, 
when  they  were  not  also  successfid  in  accomplishing  the 
other.  The  only  question  to  be  considered  here,  is 
this  ;  in  what  manner,  at  the  least  expense,  may  a  gov- 
ernment promote  the  cultivation  and  diffusion  of  science, 
by  means  of  seminaries  of  higher  education. 

1.  I  have  remarked,  when  treating  of  production,  that 
the  instruments,  the  books,  and  the  buililings  necessary 
for  the  acconi])lishment  of  these  objects,  are  very  ex- 
pensive, and  can  rarely  be  possessed  by  individuals 
Or,  if  they  were  possessed  by  individuals,  the  cost  of 
the  investment  would  render  education  so  expensive,  as 
to  restrict  it  entirely  to  the  rich.  Hence,  we  see  thai 
j)ublic  provision  for  scientific  education,  instead  of  ben- 
efiting the  wealthy,  is,  specially,  a  benefit  to  the  poor. 
The  furnishing  of  these  means,  is  the  most  important 
duty  of  a  government,  in  so  far  as  scientific  education  is 
concerned. 

2.  Whether  teachers  should  pay  for  the  use  of  such 
means,  may  be  easily  decided.  If  they  pay  for  such 
use,  they  must  charge  a  proportionally  higher  price  for 
tuition.  If  they  have  the  use  for  noihing,  their  cbaigei 
for  tuition  will  fall  in  proportion. 

3.  The  emolument  of  the  teacher  should  be  made  to 
depend  upon  his  professional  skill  and  ability.  In  no 
other  manner  w  ill  the  necessary  stimulants  be  presented 
to  inofessional  industry  ;  and  in  no  other  way  will  it  be 
rendered  impossible  for  a  man  to  support  hiujself  in  this 
profession,  without  perforiuing  its  duties  with  skill  and 
6delit) .     I  have  no  doubt  that  the  mode,  in  this  coun- 

34* 


402  EXPENSES  FOR  EDUCATION. 

try,  of  remunerating  all  college  officers  by  a  fixed  salary, 
is  fcxcteclingly  unfavorable  to  the  progress  of  education. 
If,  for  thd  sake  of  promoting  the  study  of  a  particular 
science,  funds  be  provided  lor  the  partial  support  of  an 
instructor,  they  should  always  be  so  managed,  as  not  in 
any  manner  to  conflict  with  the  principle  here  advanced. 
4.  If,  in  addition  to  this,  funds  be  providec^for  the 
education  of  a  certain  number  of  those  who  are  indigent, 
I  think  this  should  be  done  upon  the  following  prin- 
piples  :  — 

1.  The  provision  should  be  so  made,  as  to  benefit 
merelij  the  indigent^  and  not  reduce  the  price  of  tuition 
to  the  ichole.  If.  tuition  be  so  expensive  that  A  cannot 
procure  it,  and  it  be  desirable  to  educate  him,  it  may  be 
well  to  make  provision  for  him.  But  this  is  no  reason 
why  the  price  of  tuition  should  be  reduced,  in  an  equal 
degree,  for  B,  C,  D,  and  the  rest  of  the  conmiunity, 
who  are  able  to  pay  for  it  at  its  natural  cost. 

2.  'J'he  provision  should  be  so  made  as  not  to  inter- 
fere with  the  principle  above  advanced,  that  teachers  be 
rewarded  according  to  their  skill  and  fidelity.  If  it  be 
so  made  that  a  college,  on  account  of  its  cheapness,  will 
always  be  full,  and  its  officers  be  paid,  whether  they 
perform  their  duties  or  not,  it  will  retard,  instead  of 
promoting,  the  cause  of  education. 

3.  It  might  be  of  advantage,  supposing  a  series  of 
schools  were  established,  if  gratuitous  admission  to  the 
higher  seminaries  were  the  reward  of  talent,  diligence, 
and  good  conckict  in  the  lower.  This  would  be  a  strong 
stimylant  to  efibrt  in  the  lower  schools,  and  would  be 
more  likely  than  any  other  mode,  to  limit  the  bounty  of 
the  public  to  those  who  are  the  most  deserving  of  it. 

It  may  not  be  amiss  here  to  add,  that  the  success  of 
public  eflbrts  for  the  purpose  of  promoting  scientific 
education,  will  depend  very  greatly  upon  the  mode  in 
which  those  eflbrts  are  exerted.  If  they  be  directed  to 
the  single  object  of  reducing  the  cost  of  educaticn, 
nothing  but  this  object  will  be  effected.  Pupils  will  pay 
the  smallest  possible  sum  for  tuition,  and  the  instructors 
will  receive  the  smallest  possible  remuneration  for  their 


I 


RELIGIOUS     ESTABLISHMENTS.  403 

sei vices,  and  their  services  will  be  of  tlie  smallest  possi 
ble  value.  A  man  would  be  considered  very  simple, 
who  flattered  himself  that  he  could  purchase  twenty-live 
dollars'  worth  of  broadcloth,  or  flour,  or  collee,  for  five 
dollars.  Let  him  jilease  himself  with  his  own  fancies  as 
Jte  may,  it  will  be  found  in  the  end,  that  for  five  dollars, 
,he  has  received  no  more  than  five  dollars'  worth.  The 
case  is  the  same  with  education.  Men  may  have  teach- 
ers worth  five  hundred,  or  one  thousand,  or  two  thousand, 
or  three  thousand  dollars  per  annum.  But  they  will 
greatly  mistake,  if  they  suppose,  that,  by  any  process  yet 
discovered,  services  worth  three  thousand  dollars  can  be 
procured  for  five  hundred  dollars. 

By  merely  reducing  the  cost,  education  will  decrease 
in  quality  as  it  increases  in  quantity.  As  the  article  is 
found  to  be  less  valuable,  it  will,  in  the  end,  be  less  in 
demand  ;  and  thus,  at  last,  not  merely  will  the  quality 
have  deteriorated,  but  the  quantity  produced  will  also 
have  diminished. 

On  the  other  hand,  if  the  efforts  of  the  public  be  di- 
rected to  improvement  of  education^  the  increased  value 
of  an  education  will  induce  a  greater  number  to  avail 
themselves  of  its  advantages.  The  literary  taste  of  tlie 
community  will  be  elevated  ;  the  demand  for  education 
will  increase,  and  thus,  not  only  will  the  quality  of  the 
product  be  improved,  but  the  amount  disposed  of  will 
be  greatly  augmented.  If  tiiese  views  be  correct,  it 
will  follow,  that  the  eflbrts  in  behalf  of  a  collegiate  edu- 
cation in  this  country,  have  not  always  been  wisely  di- 
rected, and  that,  if  much  that  has  been  done  to  render 
education  cheap,  had  been  done  to  render  education 
good,  it  would  have  been  far  better  for  the  cause  of 
science    and  of  j^rofessional  learning  among  us. 

III.    Of  expenses  for  maintaining  religious  worship 

These  expenses  need  to  be  borne  by  men  in  somt 
manner  associated  together.  It,  however,  by  no  moans 
follows,  that  they  are  to  be  borne  by  men  as  members 
of  civil  society.  It  cannot  be  proved  that  the  Christian 
religion  needs  the  support  of  civil  govirnment,  since  it 
has  existed  and  fl  jurished  when  entirely  deprived  of  this 


404  OF    NATIONAL    IMPROVEMENT. 

support.  And,  if  it  be  said,  that  every  mun  derives 
benefit  from  religious  services,  inasmuch  as  these  ser- 
vices improve  the  moral  and  intellectual  character  of  his 
neighbors  ;  and  hence,  that  every  man  ought  to  pay  for 
their  maintenance  ;  the  are;uinent  may  be  easily  met  as 
follows.  It  is  granted,  that  every  man  is  benefited  by 
the  regular  adniinistration  of  the  ordinances  of  religion, 
but  this  is  not  the  reason  for  which  these  ordinances  are 
established.  Men  unite  with  their  neighbors  to  procure 
religious  instruction,  for  their  own  benefit,  and  not  for 
the  benefit  of  others.  If  it  happen,  accidentally,  that 
others  are  benefited,  it  does  not  follow  that  they  are 
obliged  to  pay  for  this  benefit.  If  my  neighbor  erect  a 
building  for  his  own  profit,  on  his  own  land,  and  thus 
improve  my  property,  I  am  not  obliged  to  unite  in  de- 
fraying the  expenses  of  his  building.  I  am  entitled  gra- 
tuitously to  this  accidental  advantage.  I  think  the  same 
principle  applies  to  the  case  in  question. 

The  only  ground  on  which  the  support  of  religion  by 
public  taxation,  can  be  defended,  is,  that  its  existence  is 
necessary  to  the  support  of  civil  government,  and  that  it 
can  be  sustained  in  no  other  manner  than  by  compulsion. 
The  first  assertion  we  grant  to  be  true.  The  second, 
we  utterly  deny.  Hence,  we  do  not  believe  that  any 
taxation  for  this  purpose  is  necessary.  All  that  religious 
societies  have  a  right  to  ask  of  the  civil  government,  is, 
the  same  privileges  for  transacting  their  own  affairs, 
which  societies  of  every  other  sort  possess.  This,  they 
have  a  right  to  demand,  not  because  they  are  relig'ou:^ 
societies,  but,  because  the  exercise  of  religion  is  an  in- 
nocent mode  of  pursuing  happiness.  If  these  be  not 
granted,  religious  men  are  oppressed,  and  the  country 
where  such  oppression  prevails,  let  it  call  itself  what  it 
may,  is  not  in  this  matter  free. 

IV.    Of  national  improvement. 

Another  purpose,  for  which  the  public  funds  are  fre- 
quently expended,  is  national  im|)rtA'ement.  The  prin- 
ciples which  seem  to  apj)ly  to  this  case,  have  been  al- 
ready stated.  They  are  briefly  these.  Improvements 
of  coasts,  and   harbors,  and  all  that  is  necessary  for  the 


OF  THE  EXPENSES  OF  PAUPERISM.      405 

security  of  external  coninierce,  nmsi  be  done  by  tbcj 
public.  Internal  improvements,  such  as  roads,  canals, 
railroads,  &c.,  may,  in  general,  be  safely  left  to  individ- 
ual enterprise.  If  they  uould  be  a  profitable  investment 
of  capital,  individuals  would  be  willing  to  undertake 
them.  If  they  would  be  an  unprofitable  investment, 
both  parties  had  belter  let  them  alone.  The  only  case 
in  which  a  government  should  assume  such  woiks,  is 
that  in  which  their  magnitude  is  too  great  for  individual 
enterprise,  or  that  in  which  the  power  which  they  con- 
fer, is  too  great  <o  be  entrusted  to  private  corporations. 
Whenever  they  are  undertaken,  the  principles  on  which 
the  expenditure  should  be  made,  are  the  same  as  those 
which  govern  the  expenditure  of  individuals. 

V.    Of  the  expenses  of  pauperism. 

To  relieve  the  sick,  the  destitute,  and  the  helpless,  is 
£  religious  duty,  and  therefore  should,  like  every  other 
religious  duty,  be  a  voluntary  service.  Hence,  charity 
in  a  moral  and  religious  community,  should  generally  be 
dispensed  by  individuals  from  their  own  resources,  or 
from  the  resources  of  voluntary  associations. 

Nevertheless,  as  cases  frequently  occur  which  could 
not,  with  sufficient  promptness,  be  relieved  by  the  aid 
of  individuals,  or  in  which  the  burden  would  press  too 
heavily  on  the  most  charitable,  it  may  be  proper  thai 
some  public  provision  should  be  made  for  the  relief  of 
those  whom  old  age,  or  infancy,  or  sickness,  has  de- 
prived of  the  power  of  providing  the  means  necessary 
for  sustenance. 

By  far  the  greater  number  of  persons  requiring  such 
aid,  are,  however,  capable  of  some  labor,  and  are  also 
possessed  of  ^ome  skill.  They  are  also  far  happier, 
when  engaged  in  suitable  labor,  than  when  idle.  It  is, 
therefore,  the  dictate  of  benevolence,  as  well  as  of  econ* 
omy,  to  provide  them  with  means  of  piofital)le  occu- 
pation. This  labor  and  skill,  if  judiciously  employed 
upon  capital,  will  commonly  defray  the  ex|)enses  of  the 
support  of  paupers.  Hence,  the  best  method  of  reliev- 
ing the  poor.  Is  to  provide  some  establishment  furnished 
with  sufficient  capital,  in  which,  all  the  poor  who  need 


406  OF    WAR. 

assistance,  may  l)e  emjjloyed  and  supported.  In  many 
casos  ill  New  England  and  New  Yoik,  farms  have  been 
purchased  by  towns  or  by  counties,  for  this  purpose 
It  has  generally  been  found,  that  the  only  expense  ne- 
cessary to  be  incurred,  is  the  purchase  of  the  farm,  or 
the  first  investment  of  the  capital.  The  establishment, 
after  this,  under  judicious  management,  has  generally 
paid  ts  own  expenses,  and,  in  some  cases,  as  I  have 
been  informed,  has  even  yielded  a  revenue  to  the  public. 
The  expenses  of  pauperism,  if  they  be  defrayed  in  this 
manner,  must,  of  necessity,  be  very  niotlerate  ;  while  a 
competent  and  convenient  provision  may  be  made,  for 
every  individual  who  actually  deserves  assistance. 

VI.    0/  fVar. 

The  chea|)est  defence  of  nations,  I  suppose  to  be  the 
exercise  of  justice  and  benevolence.  If,  however,  a 
nation  resolve  upon  the  employment  of  military  force, 
economy  would  direct  that  both  its  plans  and  means  of 
defence,  should  be  extensive,  scientific,  and  complete. 
Its  territory  and  its  coasts  should  be  accurately  sur- 
veyed with  reference  to  this  object.  Its  assailable  posi- 
tions should  all  be  strongly  fortified.  Munitions  of  war 
should  be  provided  in  abundance.  Schools  for  instruc- 
tion in  the  art  of  war,  should  be  supported  at  the  public 
expense,  and  the  persons  so  educated  should  be  main- 
tained, either  in  whole  or  in  part,  at  the  public  ex[)ense, 
so  that  their  services  may  be  commanded,  whenever 
they  may  be  required.  In  this,  as  in  every  other  case, 
economy  teaches  us,  that  if  a  given  object  is  to  be  ef- 
fected, no  expense  is  unreasonable,  which  is  necessary 
to  effect  it  in  the  most  perfect  manner.  The  manner 
of  expenditure  is  to  be  learned  from  the  teachers  of  mil- 
itary science.  Kconomy,  therefore,  directs  that  the 
most  valuable  talent  should  be  employed,  at  whatever 
expense,  for  provithng  the  plans  of  defence,  that  these 
plans  should  be  fully  and  perfectly  carried  into  efTect, 
and  that  all  should  be  done  at  no  greater  cost  than  is 
necessary  to  the  a(;comi)lishment  of  the  object. 

THE    END.     . 


11  1  6  S  » 

3  7- 

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